Determinants of firm liquidity in Central and Eastern Europe SMEs Online publication date: Tue, 29-Nov-2022
by Iman Samir Youssef; Adel F. Al Alam; Charbel Salloum
International Journal of Globalisation and Small Business (IJGSB), Vol. 13, No. 2, 2022
Abstract: This study examines firm-level determinants of liquidity as reflected by the cash conversion cycle for SMEs in Central and Eastern Europe. This study focuses on non-financial SME firms in Central and Eastern Europe. GDP growth was the only macroeconomic variable used in this study and the only variable with insignificant influence on liquidity in regression conducted for the seven countries studied, using the GMM estimation method. The sensitivity of liquidity to explanatory variables (profitability, leverage, tangibility, growth, age, size, and GDP growth) was examined on data composed of 160 publicly-listed SMEs with 1,600 the total number of observations for the period 2011-2019. Profitability, leverage, and size have a positive significant influence on liquidity. The positive significant influence of profitability reflects how SMEs with low levels of liquidity depend on profitability to meet cash requirements for investing in liquidity.
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