Determinants Of The Amount Of Banks' Loans To Non-Financial Corporations In The Republic Of Croatia

Croatian capital market is extremely bank-based market and most companies, in addition to their own internally generated funds, are financed primarily by borrowing from banks. Banks in Croatia are mainly focused on financing the household population while the proportion of funds that are approved to corporations is significantly smaller. Furthermore, government often indirectly requires banks to buy government debt securities. Croatian non-financial corporations have no significant possibility to finance their business with debt or equity securities but have to mainly rely on financial institutions and in the Republic of Croatia financial institutions are generally banks. A bank, in such a business environment, defines the basic conditions and the amount of financing which will be allocated to non-financial corporations. The aim of this paper was to identify, via multiple regression, among certain variables those variables that have significant influence on the amount of bank loans to non-financial corporations in the Republic of Croatia. The results show that the ratio of the share of loans granted to the central government in total loans, the share of loans granted to households in total loans and the share of purchased long-term central government debt securities in total assets has a statistically significant negative effect on the amount of loans granted by banks to non-financial companies. On the other hand, the increased share of banks' reserves with the Croatian National Bank in total assets ratio has a statistically significant positive effect on the amounts of loans granted by banks to companies. A conclusion can be made based on the obtained results about the impact of certain variables on the amount of loans to non-financial companies. Direct or indirect influence on certain variables can affect the amount of loans granted by banks to non-financial companies in the Republic of Croatia.