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Interactions Between Business And Financial Strategies In Serbian Companies

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  • Djordje Kalicanin
  • Miroslav Todorovic

Abstract

We surveyed financial and general managers of 58 companies in Serbia in order to examine their views on the interactions between business and financial strategies. Although the theoretical views are well known and clear, in practice, when there is limited availability of funding sources, a meaningful combination of business and financial risk can be very difficult. We found moderate interactions between business and financial strategies. Managers of companies in Serbia are very aware of the fact that the high volatility of operating profit suggests that they should limit borrowing. However, ordinary practical problems in day-to-day operations, such as long periods of collection of accounts receivable, force the companies to take additional debt. There are significant differences between the views of managers of large companies and managers of small businesses on how business strategy dictates financial strategy. However, firm size is not relevant to the current level of debt, although earlier decisions on business strategy in terms of diversification and internationalization are relevant to the level of leverage. Somewhat surprisingly, the current level of debt does not affect the intended financial strategy in the sense of the managers’ preferences to take additional debt to finance possible diversification and internationalization or other high-risk financially demanding business strategies. As the pecking order theory advocates, managers have a strong tendency towards internal financing.

Suggested Citation

  • Djordje Kalicanin & Miroslav Todorovic, 2014. "Interactions Between Business And Financial Strategies In Serbian Companies," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 59(203), pages 55-74, October –.
  • Handle: RePEc:beo:journl:v:59:y:2014:i:203:p:55-74
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    Cited by:

    1. Erik Syawal Alghifari & Atang Hermawan & Ardi Gunardi & Agus Rahayu & Lili Adi Wibowo, 2022. "Corporate Financial Strategy in an Emerging Market: Evidence from Indonesia," JRFM, MDPI, vol. 15(8), pages 1-12, August.

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    More about this item

    Keywords

    business strategy; financial strategy; diversification; internationalization; capital structure;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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