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AD ALTA

JOURNAL OF INTERDISCIPLINARY RESEARCH

the support and financing of SMEs is not sufficient, and is only
very slowly moving towards a genuine form of corporate
financing. Problematic areas of financing are designated phases:
planning, decision-making and business management, tax liability
and the possibility of obtaining capital for the further
development of SMEs. Development phase of an enterprise has
an impact on the specific arrangements for financial management,
forms of financing and tools used for the internationalization of
the company, Fig. 1. Each stage of development has different
characteristics that are manifested variously in international
markets in both cash flow and management style and business
development in international markets (Block et al., 2004;
Dluhošová, 2008). The factors influencing the capital structure in
micro, small and medium-sized enterprises in countries of Central
Europe examined Mateev et al. (2013). Fundamental factors of
internationalization in relation to business financing are the areas
of: financial planning, decision making and management,
reporting and accounting standards.

Figure 1: Influence of business processes on the
internationalization of the company
Source: modified by the author, Block et al. (2004), Dluhošová
(2008)

According to the different stages of company development the
form and method of financing is defined (Machková, 2015;
Marek, 2009). Financing through venture capital has grown in
importance in the last decade. In spite of this there exists very few
practical studies. Many forms of venture capital exist. The
investor does not usually provide only financial resources, but
usually becomes part of the business (

Juřičková et al., 2013;

Zinecker et al., 2013). They participate in business risk and have
the same rights and responsibilities as a business owner. The
development of venture capital in the Czech Republic is typified
by managerial buyouts of profitable groups of large companies.
The management of such groups requires takeover and self-
management (

Dvořák et al., 2008; Nývltová et al., 2007; Czech

Invest, 2017). The professional literature describes venture capital
differently and there exists a number of definitions. Venture
capital can be considered as a subordinate name for, "private
equity".

2 Methodology

The author's own research on sources of SME financing is for the
period 2009-2016 and this research is continuing (Meixnerová et
al., 2017). The primary objective of my own research is the
analysis of financial decisions on the financing method of
companies in the Czech Republic in the context of international
activities. When analyzing the links between the indicators it is
assumed, that the selected indicators have their information used
and they are a necessary source of information for the decision-
making activity on the form of financing the enterprise. Variables
considered in the model are not static, but cointegrated. When
variables considered in the model are not static, but cointegrated,
we applied the error correction model is applied by error
correction model (VEC model indicated, also referred to as the
EC model). According to Hindsl et al. (2000) in a linear
relationship can be expressed provided that the variables xt and yt
are the first order and integrated by means of an error correction
mechanism in the form:

∆y

+ γ

∆x

+ η (y

t-1

βx

t-1

) + u

, kde

η<0

(1)

where β is the cointegration parameter. β type parameters describe
the long-term cointegration relationship between variables entered
into the so-

called cointegration vectors of type (1, β)'. The paper

model error correction to change the profit (Δvh) described by the
equation:

∆vh

= LevRatio

, ROA

, ROE

,ROC

t ,

,CK

(2)

where indebtedness (LevRatio) is perceived as a temporary
growth indebtedness (marked "minus"), which leads to increased
profitability indicators (ROA, ROE, ROC) (marked "plus"). Use
of foreign capital (CK) is cheaper (marked "plus"), venture capital
(VC) (marked "plus") and equity (VK) (marked "minus") should
not be used in greater amounts (quantities) than foreign capital. It
is preferred to use international accounting standards (IS) (marked
"plus") and Czech accounting standards (CS) (marked "minus")
are not significant for the international environment. The
economic model is formally written as follows:

VH = f (LevRatio

, ROA

, ROE

,ROC

t ,

,CK

, IS

)

(3)

VH = (-, +, +, +, -, +, +, +, -)

(3a)

3 Research

Comparison of the venture capital of the European market with
the US can´t be compared sufficiently yet. The European venture
capital market is small. Fig. 2 definated EVCA (2016a) shows
that the proportion of investment in venture capital in proportion
to the gross domestic product for the year 2016 for the Czech
Republic amounted to 0.002%, which is quite far from the
European average, which amounts to 0.027%. Venture capital
values have tripled in the Czech Republic compared to 2014 and
it has been a strong year for venture capital (EVCA, 2016). In
venture capital, a typical investment of profiling business is in
activities which lead to product/service expansion to other
markets or working capital in connection with rapid revenue
growth. Investors are usually satisfied with minority stakes, as the
usual functioning of a young companies is very often directly
dependent on the personality of the owner and a stable
management team is still being created. Most of the investors
operate on a fund basis in the Czech Republic. However, the fund
itself is preceded by a time when the fund's future fund manager
must find sufficient financial resources to manage. The main
venture capital investors are usually pension funds, funds of
funds, state institutions, banks and family offices (under this term
can be represented, in particular, wealthy individuals or families
who could obtain funds from, for example, the successful sales of
their companies, etc.). The typical investment duration is between
3 and 7 years. According to the analysis EVCA (2016), it can be
stated that venture capital is mostly used by large enterprises. For
SMEs, venture capital opens up new possibilities. Besides
financial barriers SMEs must solve infrastructure barriers (small
cooperation between enterprises, insufficient cooperation between
enterprises and higher education and research institutions) or
information barriers (insufficient information on technological
opportunities, insufficient information when starting a business,
etc.).

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