Macroeconomic Stabilization Programs and Financial Performance of Small and Medium Sized Enterprises in Turkey

Journal of International Business and Entrepreneurship, Vol. 11, No. 1, pp. 19-40, 2005

18 Pages Posted: 24 Mar 2006

See all articles by Alovsat Muslumov

Alovsat Muslumov

Dogus University

Guler Aras

Yildiz Technical University

Cenktan Ozyildirim

Istanbul Bilgi University

Abstract

We have examined macroeconomic transmission mechanism by analyzing the interaction process between macroeconomic forces and financial performance variables of small and medium-sized enterprises (SMEs) in Turkey employing panel data regression method. Our empirical analysis indicates that the profitability of SMEs is declining and business risk is increasing as real exchange rate appreciates as a result of the exchange rate anchored stabilization policies. High interest rates prevalent in the Turkish economy also push SMEs to stay liquid instead of going to the investment. This finding provides support to the complementarity theories which suggest that companies choose between investing their funds to the financial assets or real assets. Since the investment in the financial assets finances the soaring public sector borrowing requirements, it doesn't immediately channel back to the real economy. As expected GDP growth rate and growth in industrial production index promotes the profitability of the real economy and decreases its business risk.

Keywords: SME, small and medium sized enterprises, macroeconomic stabilization programs, Turkey

JEL Classification: L11, N80, E63

Suggested Citation

Muslumov, Alovsat and Aras, Guler and Ozyildirim, Cenktan, Macroeconomic Stabilization Programs and Financial Performance of Small and Medium Sized Enterprises in Turkey. Journal of International Business and Entrepreneurship, Vol. 11, No. 1, pp. 19-40, 2005. Available at SSRN: https://ssrn.com/abstract=890068

Alovsat Muslumov (Contact Author)

Dogus University ( email )

Zeamet Sok. 21
Acibadem, Kadikoy
Istanbul, 34722
Turkey

Guler Aras

Yildiz Technical University ( email )

Istanbul
Turkey
+90 212 3832515 (Phone)
+90 212 2594202 (Fax)

HOME PAGE: http://guleraras.com

Cenktan Ozyildirim

Istanbul Bilgi University ( email )

Eski Silahtarağa Elektrik Santralı
Silahtarağa Mah. Kazım Karabekir Cad. No: 1 Eyüp
Istanbul, 34060
Turkey

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