ENTREPRENEURIAL VENTURES UNDER INFORMATION ASYMMETRY IN TRANSITION COUNTRIES

Abstract

The firm activities that drive economic growth cannot be sustained without financial support of credit institutions. Financial support to firms has been one of the most crucial challenges especially for banks in transition economies due to information asymmetry and transition deficiencies. Similarly, large firms and SMEs in Kosovo face liquidity constraints due to these inefficiencies. This paper explores credit activities under information asymmetry in functions of enterprise development. A survey conducted with 200 firms, including 100 large firms and 100 SMEs in Kosovo responds to the above dilemmas. The empirical results of this paper suggest that large firms that possess their own capital in Kosovo are more dependent on bank funding to grow, compared to small firms that survive with their own funds but do not grow much.

Keywords

• adverse selection
• firms
• information asymmetry
• moral hazard
• ventures