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The Impact of the Business Environment on the Formalization of Informal Firms. The Case of Kosovo

The Impact of the Business Environment on the Formalization of Informal Firms. The Case of Kosovo AbstractThe research presented here investigates the impact of the business environment on the formalization of informal firms, using firm-level data for 243 informal firms in Kosovo. The findings indicate that business-environment variables such as limited access to financing, the cost of financing, the unavailability of subsidies, tax rates, and corruption have a significant negative impact on the formalization of informal firms. In addition, firm-level characteristics analysis suggests that the age of the firm also exercises a significant negative impact, whereas sales volume exerts a significant positive impact on the formalization of informal firms. These findings have important policy implications and suggest that the abolition of barriers preventing access to financing, as well as tax reforms and a consistent struggle against corruption may have a positive influence on the formalization of informal firms. On the other hand, firm owners should consider formalization to be a means to help them have greater opportunities for survival and growth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Südosteuropa de Gruyter

The Impact of the Business Environment on the Formalization of Informal Firms. The Case of Kosovo

Südosteuropa , Volume 68 (4): 25 – Dec 16, 2020

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Publisher
de Gruyter
Copyright
© 2020 Walter de Gruyter GmbH, Berlin/Boston
ISSN
0722-480X
eISSN
2364-933X
DOI
10.1515/soeu-2020-0035
Publisher site
See Article on Publisher Site

Abstract

AbstractThe research presented here investigates the impact of the business environment on the formalization of informal firms, using firm-level data for 243 informal firms in Kosovo. The findings indicate that business-environment variables such as limited access to financing, the cost of financing, the unavailability of subsidies, tax rates, and corruption have a significant negative impact on the formalization of informal firms. In addition, firm-level characteristics analysis suggests that the age of the firm also exercises a significant negative impact, whereas sales volume exerts a significant positive impact on the formalization of informal firms. These findings have important policy implications and suggest that the abolition of barriers preventing access to financing, as well as tax reforms and a consistent struggle against corruption may have a positive influence on the formalization of informal firms. On the other hand, firm owners should consider formalization to be a means to help them have greater opportunities for survival and growth.

Journal

Südosteuropade Gruyter

Published: Dec 16, 2020

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