03 Petkovic:tipska.qxd 23 Goran Petković1, Snežana Konjikušić2, Lidija Barjaktarović3*, Renata Pindžo4 1University of Belgrade, Faculty of Economics, Serbia 2 FEFA, Metropolitan University, Belgrade, Serbia 3 Singidunum University, Belgrade, Serbia 4 Ministry of Trade, Tourism and Telecommunication, Serbia Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2019/24(2) What is the Real State of Financial Management in Companies in the Republic of Serbia? DOI: 10.7595/management.fon.2018.0002 Abstract: 1. Introduction The contemporary work environment demands not only companies’ adjustment to it but the introduction of new functions and ways in the business operations as well. Consequently, this paper focuses on the prac- tices in the basic decision-making within the business finances framework, as well as the knowledge of the risk management (RM) concept in company operations in the Republic of Serbia (RS). Chief Financial Officers (CFOs) play a significant and dynamic role in the company’s development and con- tribute to achieving all the company’s objectives (Van Horne & Wachowicz, 2007). Also, the contemporary business prerequisites require that a CFO should gain new skills and knowledge in order to successfully live up to the challenges relating to business risk management (D’Arcy, 2011), and lately, to the special issues of data security and protection (Majdalawieh, 2014). The key responsibilities of the CFO are linked to the fi- nancial policy and corporate planning, that is, treasury management and controlling (Brealey et al., 2007). Financial management deals with procurement, placement and management of the financial means of the company with a view to reaching a higher goal of the company’s operations. Three crucial fields of financial management are financing, investment and asset management (Van Horne & Wachowicz, 2007). There- fore, the basic groups of decisions in business finances are the following: the investment decisions, the fi- nancing decisions and the dividend payout decisions (Barjaktarovic et al., 2013). On the other hand, the * Corresponding author: Lidija Barjaktarović, e-mail: lbarjaktarovic@singidunum.ac.rs Research Question: This paper focuses on the basic financial decision making practices of domestic companies and their knowledge of the operational risk management concept. Motivation: Chief Financial Officers (CFOs) play a significant role in the company’s development and achieving the company’s objectives (Van Horne & Wachowicz, 2007). Different authors carry out research based on one of the fields of finances-related decision making, such as Graham & Harvey, 2001. The goal of this research is to show that the difference in the decision making process concerning companies’ finances and risk management depends on the company’s ownership structure. Idea: The paper is aimed at the recognition of differences found in corporate decision making, relating both to capital budgeting and capital structure, dividend payout policy and risk management concept, depending on the ownership structure. Data: During the first half of 2016, a research consisting of 392-companies sample operating in the Republic of Serbia was conducted, including all four listed fields concerning their economic operations. Nevertheless, only a total of 54 CFOs completed and handed back the distributed questionnaires. Tools: Some basic descriptive statistics techniques, one-way analysis of variance (ANOVA) and Kruskal-Wallis test were ap- plied throughout the entire data analysis, while data processing involved the use of standard statistical package IBM SPSS 20.0. Findings: As shown by research findings, there is a notable difference in decision making, both as regards dividend payout and as regards risk management concept, depending on the types of ownership, with companies operating in our domestic market. The future research will concentrate on practice of companies merging both domestic and foreign enti- ties, in order to determine whether a similar pattern might be found. Contribution: Furthermore, the research is intended to be complemented by the data contained in the official financial reports of those companies, with a view to ascertaining whether the statements made by their CFOs are actually applied in the corporate practice. Keywords: CFO, capital budgeting, capital structure, dividend payout policy, risk management JEL Classification: G30, G31, G32, G35 world market trends induce a more institutionalized approach to risk management in the company’s oper- ations and it is quite common for this group of activities to be placed under CFO’s jurisdiction. Enterprise Risk Management (ERM), initiated by the Committee of Sponsoring Organizations (COSO), is defined as the process (initiated by the board of directors, management and other employees) which represents an inte- gral part of the company’s strategy aimed at the identification of the potential events affecting the very busi- ness operations for the sake of better RM within the existing level of the willingness to accept a certain risk (Liebenberg & Hoyt, 2003). What matters is the discipline of control assessment, financing and monitoring all the company’s risks with a view to increasing the value for its owners (COSO, 2004). Thus, all the risks are examined simultaneously and managed holistically (Society of Actuaries, 2001) within the coordinated and strategic framework. The contemporary business environment deems a holistic approach to RM as highly important. In addition, the results of the conducted research corroborates the fact that a properly es- tablished ERM contributes to the making of better decisions within a company (Gates et al., 2012) and to the achieving of better business performances (Pagach & Warr, 2007). This paper aims to establish whether there are differences in decision making concerning capital budget- ing (CB) and capital structure (CS), dividend payout policy (DPP) and RM concept in companies, all de- pending on the ownership structure. Four major auditing companies (Deloitte, 2017; PwC, 2015; EY, 2016; KPMG, 2017) conduct research among CFOs worldwide and regionally, every year focusing on the macroeconomic trends in the country and abroad and their impact on the company’s (present and future) operations, potential mergers and takeovers, the availability of financing source, an annual growth potential of the companies themselves and the role of CFOs (including different operations performed by them and the future growth and development prospects). On the other hand, different authors carry out research based on one of the fields of finances-related deci- sion making (capital budgeting practice in the research of: Andor et al., 2011; Dedi & Orsag, 2007; Daniel- son & Scott, 2006; Brounen et al., 2004; Graham & Harvey, 2001; Vijay & Ashwani, 1995; Gitman & Forrester, 1977; capital structure in the research of: Atiyet, 2012; Andor et al., 2011; Hashi & Toci, 2010; Beck et al., 2004; dividend pay-out policy in the research of Servaes & Tufano, 2006) in different regions and continents (the USA– in the research of Gitman & Forrester, 1977, and Danielson & Scott, 2006; Canada– in the re- search of Vijay & Ashwani, 1995; Europe – /western - in the research of Brounen et al., 2004;/ central and eastern– in the research of Andor et al., 2011; Dedi & Orsag, 2007; Haas & Peeters, 2006/, and RM in com- pany’s operations /in terms of the significance, components, application, impact on the business perform- ances and company value, the impact of the financial crisis on the future development of RM, the occurrence of new risks, etc./ (Baxter et al., 2013; Beasley et al., 2010; Beasley et al., 2008; Pagach & Warr, 2011). This research will simultaneously encompass all four elements and be based on the practices in the RS, along with the application of the previous-research employed methodology. The main hypothesis is that the difference in the decision making process on companies’ finances and risk management depends on the company’s ownership structure. As a result, the paper consists of four parts. The introductory part concentrates on the definition of the subject, goal and hypothesis of the research. The second part features the research methodology. The research findings will be presented in part three. Finally, the concluding considerations will pinpoint the future directions of the research. 2. Methodology For the sake of this research, the authors have devised a questionnaire/survey of 53 questions which are sub- sumed under the following five categories: I – Personal data, II – CB, III – CS, IV – DPP and V – RM with the company. All the questions in the questionnaire apart from the personal data questions have used the same ordinal five-level scale (1- No, 2- Little, 3- Partially, 4 – Much, 5 – Very much). The subjects of the research are the CFOs of the companies operating in the RS. The questionnaire is modelled after the questionnaire created by Graham and Harvey in 2001 (consisting of 15 questions) for the research carried out among 4,400 companies. The questionnaire draft had initially been distributed to numerous financial analysts for the revision before it was distributed to the subjects of this research. The questionnaires were emailed to the CFOs, with the authors’ possibility to contact the subjects over the telephone in case of some unclear issues, for the purpose of clarifying them. The questionnaire was completed by 54 CFOs out of 392 CFOs who had been sent the questionnaire in the first part of 2016, so the response rate amounted to 13.77 per cent, which can be defined as “reasonable“ (Sivo et al., 2006). Furthermore, it can be defined as acceptable due to the announced results in the re- search of Kilic et al. (2011), Graca et al. (2015) and Homburg et al. (2015) where response rates were 11%, 13.22%, and 18%, respectively. The basic criterion for forming the sample was the ownership of companies 24 Goran Petković, Snežana Konjikušić, Lidija Barjaktarović, Renata Pindžo 2019/24(2) grouped under 8 sectors (25% belonging to the manufacturing industry, 20% to the financial sector, 20% to the retail and wholesale sector, 15% to the tourism sector, 5% to the telecommunications, 5% of the IT sec- tor and 10% to the consulting sector of the overall sample). As a result, the sample comprised 7.41% of the state-owned (SO) enterprises, 33.33% of the foreign-owned (FO) companies, 48.15% of the privately-owned (PO) companies and 11.11% of the companies which do not belong to any of the above listed ownership structures, therefore, they are subsumed under the category of „other“ (O). A total of 54 subjects responded to nine questions relating to the CB concept (questions from 1 to 9) as well as to nine questions relating to the company’s CS concept (questions from 10 to 18). The questionnaire con- tains 15 questions relating to the DPP (questions from 19 to 33) and 12 questions referring to the RM sys- tem (questions from 34 to 45). A total of 50 CFOs responded to these questions. A part of the data processing and a part of the questionnaire was presented in Barjaktarovic et al. (2016) with the authors indicating that PO tend to primarily use traditional CB techniques in comparison with the modern ones. The data analysis employed the use of descriptive statistics, one-way variance analysis and Kruskal-Wallis test. The data processing included the application of a statistics package IBM SPSS 20.0 3. Research Findings Since the survey contains five question groups, the next part presents the results of four question groups, excluding the Personal data question group. It was vital to investigate the (non)existence of difference in CB techniques, CS, DPP and RM systems in the companies with different ownership structures. In relation to the ownership structure, SO, FO, PO companies were under examination, including the companies classi- fied under the category O. 3.1 Capital Budgeting The second part of the survey/questionnaire contained questions referring to the CB. The CB covers deci- sions on the allocation of the investments in new but also in the existing projects, as well as in M&A and sim- ilar processes (Gervais, 2011). It was important to investigate whether there was a significant difference in the company’s CB concept compared to the type of their ownership. Bearing this in mind, it was necessary to introduce a new variable, in such a manner that each subject was awarded an average value of all his/her responses relating to the company’s CB concept. The obtained variable had a regular distribution, which is indicated by the Skewness/Std.Error = -1.43 ratio, as well as Kurtosis/Std.Error = -0.83. Therefore, in the process of determining the difference existence in the company’s CB concept in comparison with owner- ship structure, it was convenient to apply the one-way variance analysis, as a parameter technique. More precisely, by applying variance analysis, efforts were made to ascertain if companies of different ownership structure exhibited significant differences in CB techniques, according to different features used for de- scribing the CB concept, which were evaluated in this research. Table 1: The Results of One-Way Variance Analysis of Different Ownership Structure Companies Source: Authors’ calculations By this procedure, the nonexistence of a significant difference in the CB concept of different ownership- structure companies was determined. However, it does not mean that there are no differences in the prac- tice of appliance. According to the research results of Andor et al. (2011), this is influenced by the firm size and multinational management culture. The CB concept was analysed based on the following: investment and development policy, business plan application, cash flow projections, investment criteria for project selection, capital cost calculation for in- vestment decision making, discount rate correction for investment decision, cash flow for the stated differ- ences, the difference between company risk and a specific investment risk on determining the discount rate and the most common investment type. The next part exhibits the overall findings of each component ob- served within the CB. 25 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2019/24(2) State-owned Foreign- owned Privately- owned Other F p-value Average Average Average Average 3.8785 4.1034 3.4842 3.0748 2.551 0.066 � The obtained questionnaire results for the companies observed regardless of the ownership structure do not show any significant differences in attaching importance to the clearly defined investment and development policy. The FO companies attach the highest importance to the clearly defined investment and dividend pol- icy, in comparison with the SO, PO and O companies. The business plan, as one of the planning instruments with a detailed plan of future investments, as well as cash flow projections before the investment decision making, are without difference frequently used in all the analysed companies, regardless of their ownership structure. During the project selection, the analysed companies predominantly use the investment criteria in the fol- lowing order: return period, profitability index, net present value, internal rate of return, sensitivity analysis, accounting rate of return, discounted return period, and other. It is evident, regardless of the ownership structure, that each criterion is used within a never-to-always range.It is important to emphasize that retrieved results regarding the predominantly used investment criteria return period, are in line with the results of Brounen et al. (2004), which stressed that European firms (located in Western Europe) were keeners of re- turn period, in comparison to discounted cash flow techniques such as net present value and internal rate of return. Moreover, it is in line with research results of Andor et al. (2011) for 10 Central-Eastern European (CEE) countries (a sample of 10 countries: Bulgaria, Croatia, the Czech Republic, Hungary, Latvia, Lithua- nia, Poland, Romania, the Slovak Republic and Slovenia), where the return period is preferable by compa- nies. Finally, Dedi & Orsag (2007) did a similar survey in Croatia, which is the most similar to Serbia (geographically, historically and culturally connected). The obtained results were as follows: 24% of analyzed companies often use internal rate of return and the return period, while 22% of monitored companies most frequently use the net present value and internal rate of return. This is similar to CEE results. During the investment decision making, the investigated companies predominantly calculate the capital cost by applying the following methods: „other“, average historical return on previous investments, CAPM model, the rate assigned by the state, average historical return on common stocks of the company, dividend dis- counting model. This can be explained by a low level of development of the Serbian financial market. Ac- cording to Dedi & Orsag (2007), the analysed companies stated that: 76% of them estimated the cost of capital using some formal technique, 40% of them calculated the cost of capital according to the investors’ required return and 9% used the CAPM. The usage of CAPM was very low (which is in line with the CEE re- gion). Furthermore, testing on Croatian companies profitability indicators in the period of 2007 to 2010, con- firmed that there was a high level of connection between cost of capital and profitability ratios of the company (Orsag & Mitar, 2014). Moreover, it was in line with credit analysts’ opinion in Romania (Dragota et al., 2011). Finally, it was in correlation with Markovics (2016) (1) a considerable amount of European and US corpora- tions calculated the indicator of the payback period; (2) the net present value and the internal rate of return were the two most frequently used discounted cash-flow methods; (3) companies in France and Hungary used the profitability index more often than companies in other surveyed countries. During the investment decision making process, the risk adjusted discount rates are predominantly cor- rected by the following: inflation, foreign-exchange risk, raw material price change, business risk and the change of market interest rates. The obtained results are in line with the Croatian market. According to Dedi & Orsag (2007), 81% of the companies regularly did project cash flows’ estimations, and 73% of the com- panies assessed the project risk; 42% of the companies used a risk adjusted discount rate. The companies under examination point out that there is a difference of sometimes-to-frequently range be- tween the company-related risk and the investment-related risk when determining the discount rate. Companies predominantly invest in production, new factories/plants, procurement of latest equipment, new product launch and market expansion. On the other hand, they are reluctant to make an investment in de- sign changing, the changing of the existing product packaging as well as the employees. 3.2 Capital Structure The survey questionnaire contains the usual questions relating to CS. It was important to investigate if there was a significant difference in the companies’ CS concept in comparison to the type of their ownership. Bearing this in mind, it was necessary to introduce a new variable, in such a manner that each subject was awarded an average value of all his/her responses relating to the company’s CS concept. The obtained vari- able has a regular distribution, which is indicated by the ratios Skewness/Std.Error = 1.85, as well as Kur- tosis/Std.Error = -0.02. Therefore, in the process of determining the difference existence in the company’s CS concept in comparison to ownership structure, it was convenient to apply the one-way variance analy- 26 Goran Petković, Snežana Konjikušić, Lidija Barjaktarović, Renata Pindžo 2019/24(2) sis, as a parameter technique. More precisely, by applying the variance analysis, efforts were to determine if companies having different ownership structure exhibited significant differences in CS concepts, accord- ing to different features used for describing the CS concept, which were evaluated in this research. Table 2: The Findings of One-Way Variance Analysis for Companies of Different Ownership Structure Source: Authors’ calculations By this procedure, the nonexistence of the significant difference in the CS concept of different ownership structure companies was ascertained. The CS concept was analysed in the following terms: the use of internal and external financing sources, rea- sons for non-application of external financing sources, the most common forms of external financing sources, debt financing decisions, natural hedging application, obstacles for external capital procurement. The fol- lowing part presents the overall results of each component which was examined within the CS framework. Regardless of the company’s ownership structure, there are no significant differences in the use of internal and external finance sources: companies chiefly use internal funds, whereas the external sources are used to a smaller extent. This is in accordance with Atiyet’s results (2012) regarding listed companies on the French Stock Exchange, in the period from 1999 to 2005. Furthermore, it is in line with the survey of Andor et al. (2011) who found that the most preferred source of funds were retained earnings (internal source of funds) followed by straight debt, i.e., companies’ preferences suggested by the pecking order theory. Com- panies which never or very rarely use external sources indicated the following primary reasons for doing so: the bank offering unfavourable loan terms and conditions, the lack of adequate financing forms, precarious markets and lack of new investment opportunities. This is in line with the results obtained by Hashi & Toci (2010) and Beck et al. (2004), in terms of interest rates, collaterals, paperwork and bureaucracies, and ob- tained credits’ terms and conditions by commercial banks. Namely, SO, PO and O, in comparison to FO companies, are keen on using bank loans, and not so keen on using leasing and factoring. The issuing of bonds and common stocks is on a low level in the analysed companies. More accurately, bond and stock issuing is practically nonexistent in SO, PO and O compa- nies, whereas in the FO companies a low level was recorded. We should have in mind that the Serbian fi- nancial market is banco centric, and this has a direct impact on financing possibilities of companies’ business. Furthermore, it is in relation with results of Haas & Peeters (2006) who found a relation between the banking system development and the companies’ capital structure targets in Bulgaria, the Czech Re- public, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic and Slovenia. The results obtained revealed that the development of the financial systems within this region enabled companies to reach higher levels of debt and to bring their actual capital structure closer to their own target structures. When determining the CS and making decisions on debt financing, the following parameters are important: interest rate, company’s credit rating, financial flexibility, cash flow volatility, transactional costs, bankruptcy possibility, tax shield and rival companies’ indebtedness levels. The CFOs of PO companies have stated that, during the company’s borrowing process, they very rarely tend to synchronize the income currency with the companies’ liabilities to their creditors. Unlike them, SO, FO and O companies attach more importance to natural hedging. The CFOs have also maintained that, during the external capital procuring, regardless of the ownership structure, companies face average obstacles. During the capital procuring, the stated problems are in total deemed by the analysed companies as aver- age with a tendency to high. Problems ranging from the least to the biggest are the following: CFOs knowl- edge and their insight into alternative financing sources, transactional costs, low use of hedging instruments, capital market underdevelopment, poor approach to long-term funding sources, and demand for high col- lateral and restrictive loaning policy of banks. 27 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2019/24(2) State-owned Foreign- owned Privately- owned Other F p-value Average Average Average Average 2.5396 3.3246 3.0631 3.5018 1.445 0.241 � In addition, the CFOs have also claimed that a company undergoing a financing process primarily takes into account the internal sources, then the debt, and finally uses the capital. The analysed companies assess the above mentioned statement on the range from partially to a lot. Ultimately, the analysed companies’ CFOs partially agree that during the financing process they first take into account the internal sources, then the capital and finally the use of the debt. 3.3 Dividend Payout Policy In order to determine a potential significant difference in the DPP of the companies with different ownership structure, a new variable is introduced, that is, every subject is given the arithmetic mean value of his/her fif- teen responses referring to it. The formed variable exhibits no regular distribution, according to the conclu- sion made by applying Shapiro-Wilk Test (p-value=0.000), so for that reason we used the non-parameter Kruskal-Wallis Test ( (3)=5.897, p-value=0.011) in the process of determining the significant difference. The above mentioned test ascertained the statistically significant difference in the DPP with regard to the company’s ownership structure. In order to ascertain the origin of the manifested difference, we used Mann- Whitney U Test for each pair of the different ownership structure. Table 3: The Results of Mann-Whitney U Test for the Companies of Different Ownership Structure Source: Authors’ calculations The results of the non-parameter Mann-Whitney U Test indicate the existence of the difference in SO and PO companies (p-value=0.045), as well as between FO and PO companies. Thus, PO companies pay the least attention to DPP. It is logical due to the fact that the Serbian financial market is not developed and compa- nies do not provide financing on the stock market. The majority of established companies in Serbia are lim- ited liability companies, not joint stock companies. However, relevant factors for DPP are the anticipated level of future earnings and the pattern of past dividends, accounting implications, tax efficiency of alterna- tives and attractiveness to different investors (Servaes & Tufano, 2006). The obtained results support the set hypothesis that there is a difference in decision making on DPP between companies depending on the ownership structure. PO companies are less prone to dealing with DPP than SO and FO companies, which requires a more profound understanding of PO company owners’ interests which, based on the obtained findings, are not related to dividends. 3.4. Risk Management Concept in Company One of the aims was to investigate whether there was a significant difference in the companies’ RM system regarding the type of their ownership. Thus, a new variable was introduced in such a manner that each sub- ject was awarded an average value of all his/her responses relating to the company’s RM system. The ob- tained variable has a regular distribution, which is indicated by the ratios Skewness/Std.Error = -1.05, as well as Kurtosis/Std.Error = -0.79. Therefore, in the process of determining the difference existence in a com- pany’s RM concept regarding the ownership structure, it was convenient to apply the one-way variance analysis, as a parameter technique. More precisely, by applying variance analysis we tried to determine if companies having different ownership structure exhibited significant differences in RM systems, according to different features used for describing the RM system. One-way variance analysis compares variances of the values relating to the RM between companies with a different ownership structure with variances within each group, which is made up of companies with the same ownership structure. The initial stage of this method involves the use of Levene’s test, which is used 28 Goran Petković, Snežana Konjikušić, Lidija Barjaktarović, Renata Pindžo 2019/24(2) ������� �� �� ��� ��� �� ���� ��� �������������� ���������� ���������� !�� "��#�� ��� ���������� � � ���$�������� �%����&� '�� "�" (� ��� ����������������� � ��������&#�� "�&! � ����� ���������� � � ���$�������� �%'� !���%"�(��� "�" �� ����� ����������������� #� !���&�'��� "�(�!� � � � ���$��������������� ���" ���%!�%��� "�%(!� � with one-way variance analysis to determine the homogenity of variances. The test has shown that the vari- ances of the risk-related values are homogenous, that they are equated, in each of the four groups which are formed compared to the ownership structure. Table 4: The Results of Levene’s Test for the Companies with Different Ownership Structure Source: Authors’ calculations The results of the one-way variance analysis are the following: arithmetic mean and standard deviation for each of the observed groups, F-quotient, statistically significant index of F-quotient’s p-value as well as the amount of Eta coefficient are presented in the following table. The high value of F-quotient shows a greater variability between companies with different ownership structure than within every single group of compa- nies belonging to a certain ownership structure, which is corroborated by the obtained p-value with the sig- nificance level of 0.05. The obtained value of Eta coefficient, which measures the scope of impact, indicates that the ascertained difference is significant enough, so it can have a practical importance. Thus, the scope and significance of F-quotient as well as the scope of Eta coefficient of the one-way variance analysis con- firm that there are statistically significant differences in the RM values between companies with different ownership structures. Table 5: The Results of One-Way Variance Analysis on Companies of Different Ownership Structure Risk Management Source: Authors’ calculations Since the differences were ascertained, but not the differences between the types of ownership structures, it was necessary to apply a post hoc test. At this point Tukey Test was applied, with a view to determining whether the RM concepts were different in all companies with different ownership structure or whether it was a matter of differences between two or three groups of companies. The findings of this test are presented in Table 6. Table 6: The Results of Tukey Test for Companies with Different Ownership Structure Source: Authors’ calculations 29 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2019/24(2) ��������� � �� � �� ���� ���� ���� ������ �� ��� ������ � State- owned Foreign- owned Privately- owned Other F p-value Eta Average Average Average Average 3.0031 3.6600 2.8531 2.7512 3.363 0.027 0.17986 � ������� �� ��� ������� �� �� � ���� �� �� ������� ������ � � � ��� ���� ���� �� ������� � ���� ������ ������ ���� ��������� � ���� ������ ������ ���� ������ ������ ������ ���� �� ������ ��� ���� � ���� ������ ������ ���� ��������� � ���� �����!� ������ ���� ������ ������ ������ ���� � ��� !���� �� ���� � ���� ������ ������ ���� ������� � ���� �����!� ������ ���� ������ ������ ������ ���� ��� � ���� � ���� ������ ������ ���� ������� � ���� ������ ������ ���� ��������� � ���� ������ ������ ���� � 30 Goran Petković, Snežana Konjikušić, Lidija Barjaktarović, Renata Pindžo 2019/24(2) The CB research findings were that a nonexistence of the significant difference in the CB concept of different ownership structure companies was determined. The FO companies attach the highest importance to the clearly defined investment and dividend policy, in comparison with the SO, PO and O companies. During the project selection, the analysed com- panies predominantly use the investment criteria in the following order: return period, profitability index, net present value, internal rate of return, sensitivity analysis, accounting rate of return, discounted return period, and other. Companies pre- dominantly invest in production, new factories/plants, provision of latest equipment, new product launch and market ex- pansion. On the other hand, they are reluctant to make an investment in design changing, the changing of the existing product packaging as well as the employees. The CS research results revealed that a nonexistence of the significant difference in the CS concept of different ownership structure companies was ascertained. Regardless of the company’s ownership structure, there are no significant differ- ences in the use of internal and external finance sources: companies chiefly use internal funds, whereas the external sources are used to a smaller extent. Namely, SO, PO and O, in comparison to FO companies, are keen on using bank loans, and not so keen on using leasing and factoring. The issuing of bonds and common stocks is on a low level in the analysed companies. More accurately, bond and stock issuing is practically non-existent in SO, PO and O companies, whereas in the FO companies a low level was recorded. When determining the CS and making decisions on debt financ- ing, the following parameters are important: interest rate, company’s credit rating, financial flexibility, cash flow volatility, transactional costs, bankruptcy possibility, tax shield and rival companies’ indebtedness level. The CFOs have also main- tained that, during the external capital procuring, regardless of the ownership structure, companies face average obsta- cles. Problems ranging from the least to the most serious are the following: CFOs knowledge and their insight into alternative financing sources, transactional costs, low use of hedging instruments, capital market underdevelopment, poor approach to long-term funding sources, and demand for high collateral and restrictive loaning policy of banks. DPP research findings confirmed that there were significant differences in the DPP practice between companies with dif- ferent ownership structures. It is logical due to the fact that the Serbian financial market is not developed and companies do not provide financing on the stock market. A majority of established companies in Serbia are limited liability compa- nies, not joint stock companies. The obtained results support the proposed hypothesis that there is a difference in deci- sion making on DPP between companies depending on the ownership structure. PO companies are less prone to dealing with DPP that SO and FO companies, which requires a more profound understanding of PO company owners’ interests which, based on the obtained findings, are not related to dividends. The RM research findings were that there were differences in the RM concepts between companies with different owner- ship structures. Based on the obtained values, a difference between the RM systems between PO and FO companies is In the previous table the RM concept in companies with different ownership structure was evaluated. The first two columns (I, J) represent the ownership type, with column (I) listing all ownership types and column (J) listing all their combinations possible. Thus, the interpretation requires the awareness of the pairs’ double rep- etition. Column 3 contains the arithmetic mean differences relating to the risk management concept evalua- tion of certain pairs of different ownership structure companies. Column 4 features standard errors regarding the previously mentioned arithmetic means. Finally, the last column contains the p-value, that is, the proba- bility that there is/ is not a difference in risk management between the companies of a certain pair with a dif- ferent ownership structure. Based on the obtained values, a difference in the RM system between PO and FO companies is recorded. By this procedure, the existence of a significant difference in the RM concept with companies of different ownership structure is determined, with the difference originating from the significantly different RM concepts in PO and FO companies. Thus, the proposed hypothesis of this paper is confirmed.It is logical due to the fact that FO are led by foreign head-offices and they implement the best sharing prac- tice in risk management practice, as well as in implementing international financial reporting standards. The obtained results are in accordance with the research results of Barjaktarovic et al. (2017) with the size- able percentage of FO companies being familiar with the ERM system. In addition, this is in line with the presented results published in the annual reports of the top 100 companies operating in the RS which indi- cate that there is a better RM practice in FO companies than in PO and SO companies (Barjaktarovic, 2017). Also, the presented results are in line with the results obtained by Jelenkovic & Barjaktarovic (2016) who argue that an institutionalised approach to RM motivates economic entities to assert the RM function. Even- tually, the presented results coincide with the research results made by Pagach & Warr (2011), who support the claim that FO companies and large enterprises, in principle, are more successful in implementing the ERM concept. It is interesting to note that there are no recorded differences in the RM between SO and FO companies that could have been anticipated, and thus, can be the focus of some future investigations. Conclusion REFERENCES [1] Andor, G., Mohanty, S.,& Toth, T. (2011).Capital budgeting practices: a survey of Central and Eastern European firms. The World Bank, January, 1 - 45. [2] Atiyet B. (2012). The Pecking Order Theory and the Static Trade Off Theory: Comparison of the Alter- native Explanatory Power in French Firms. Journal of Business Studies Quarterly, 4(1), 1-12. [3] Barjaktarovic, L. (2017). Osvrt na upravljanje rizicima u kompanijama koje posluju u Republici Srbiji. 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The respondents in the research have pointed out that the completion of the questionnaire required a significant amount of time. In addition, our research has motivated the CFOs to take into consideration numerous company-related matters as well as the linguistic terminology which they use to define those matters. Having in mind all the stated matters, it can be concluded that a further and permanent education of the employees is necessary. FO companies have a slight ad- vantage over PO companies owing to the possibility of knowledge transfer and the use of cutting edge technologies. PO companies face greater challenges in adapting to the contemporary trends and business operation harmonisation. The future research will focus on the determination of both the relation (type and quality) and the practice of companies managing both domestic and foreign entities in order to investigate whether a similar pattern might be found. 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Capital Budgeting Practices in Corporate Canada. Financial Practice and Education, 5(2), 37-43. Received: 2017-08-07 Revision requested: 2017-10-24 Revised: 2018-01-25 Accepted: 2018-01-25 32 Goran Petković, Snežana Konjikušić, Lidija Barjaktarović, Renata Pindžo 2019/24(2) 33 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2019/24(2) Goran Petković Faculty of Economics, University of Belgrade e-mail: goranp@ekof.bg.ac.rs He graduated from the Faculty of Economics in Belgrade, courses: a) Foreign trade and b) Internal trade. The areas of professional competences are: retail, wholesale, marketing channels, sales, customer relationship management. He participated in various projects such as: market position of trading companies, the managers’ market in Serbia, the development strategies of Serbia and Belgrade trade, cost of doing business, competitiveness research, cooperative research, formulating marketing strategies for individual companies, organizational and organizational restructuring projects, projects of organization and education of sales operations companies, etc. In one period of research he dealt with issues of commodity exchange and stock exchange operations.He worked on professional training at the London School of Economics, in Mecca (Summer University) and at Hofstra University, New York State (Fulbright Scholarship). In the period 2007-2013 he was the State Secretary in charge of tourism in the Government of the Republic of Serbia (Ministry of Economy and Regional Development, i.e., Ministry of Finance and Economy). Snežana Konjikušić FEFA, Metropolitan University, Belgrade e-mail: skonjikusic@fefa.edu.rs Snežana Konjikušić, PhD, is an associate professor at the FEFA in Belgrade for a scientific field Quantitative Methods and Information Systems. She lectures the courses in Statistics, Information Systems and Methodology of Scientific Research, at BBA and master studies. She graduated at the Faculty of Mathematics, University of Belgrade, in the field of Numerical Mathematics, Cybernetics and Optimization. She graduated from postgraduate studies at the Faculty of Economics in Belgrade, Department of Operational Research, where she also defended the master’s thesis entitled “Preferences in the theory of rough sets”. Ms Konjikušić defended her doctoral thesis titled “Statistical criteria of software comparison for the application of multivariate analysis methods” at the Faculty of Entrepreneurial Management in Novi Sad. She worked as a high school teacher of mathematics, a programmer and programmer-designer at the Ineks Bank Belgrade and a private computer company. In the period from 2001 to 2009 she was engaged at several faculties in the teaching of applied mathematics, statistics, quantitative methods in management, management theory, actuarial and financial mathematics. She is the author of several professional papers published in domestic and foreign journals, monographs and textbooks. She is engaged as a consultant for domestic and foreign companies for the application of statistical models in the development of applications for the automation of production processes. Lidija Barjaktarović Singidunum University, Belgrade e-mail: lbarjaktarovic@singidunum.ac.rs Lidija Barjaktarovic has a PhD in Economic Sciences in the sectors of banking and finance. At the Singidunum University in Belgrade she teaches Banking, Risk Management and Corporate Finances (from 2008). She has been Head of Master study programs of Business Economics and Public Sector Management at the Singidunum University since 2015. She pursued a banking career in the period from 1998 to 2008. She started in the Jugobanka A.D. Belgrade, after which she moved to the Societe General Yugoslav Bank a.d. Belgrade, and then to the Raiffeisen Bank a.d. Belgrade in order to be promoted to the position of the Head of the Regional Branch Central Serbia. In 2005 she moves to the Erste Bank a.d. Novi Sad to become the Director of Corporate Division. At the end of 2007 the Erste Group appoints her member of the Corporate Board and Corporate Working Group on the level of the Erste Holding Vienna. About the Authors Renata Pindžo Republic of Serbia - Ministry of Trade, Tourism and Telecommunication e-mail: renata.pindzo@mtt.gov.rs Renata Pindžo, PhD, is an Associate Professor of Investment Management and Investment Decision Process at the FEFA, Belgrade. Since August 2014, she has been in charge of the tourism sector while working as Assistant Minister in the Ministry of Trade, Tourism and Telecommunications. In the 2008-2014 period, she was employed as Assistant Minister at the Ministry of Economy and Regional Development and at the Ministry of Finance and Economy. Since 2013, she has been a member of the National Council for the Development of Tourism in the Republic of Serbia. Ms. Pindžo graduated from the Faculty of Economics, University of Belgrade, where she obtained a Master’s degree in 2003. In May 2011, she obtained her PhD degree. Her experience includes more than 13 years in management consulting and financial advisory services. She has gained knowledge by providing consulting services to many domestic and international companies, including financial institutions and local municipalities during her employment at Deloitte. Also, as consultant, she was engaged in the World Bank`s projects related to restructuring and improving competitiveness of the Serbian economy. At the Economics Institute, Ms. Pindžo participated in research and market analysis projects. She has colaborated with many international institutions (USAID, EAR, EBRD, DFID and GIZ) on complex projects of restructuring the Serbian economy. She is the author more than 50 scientific papers. 34 Goran Petković, Snežana Konjikušić, Lidija Barjaktarović, Renata Pindžo 2019/24(2) << /ASCII85EncodePages false /AllowTransparency false /AutoPositionEPSFiles true /AutoRotatePages /All /Binding /Left /CalGrayProfile (Dot Gain 20%) /CalRGBProfile (sRGB IEC61966-2.1) /CalCMYKProfile (U.S. Web Coated \050SWOP\051 v2) /sRGBProfile (sRGB IEC61966-2.1) /CannotEmbedFontPolicy /Warning /CompatibilityLevel 1.4 /CompressObjects /Tags /CompressPages true /ConvertImagesToIndexed true /PassThroughJPEGImages true /CreateJobTicket false /DefaultRenderingIntent /Default /DetectBlends true /DetectCurves 0.0000 /ColorConversionStrategy /LeaveColorUnchanged /DoThumbnails false /EmbedAllFonts true /EmbedOpenType false /ParseICCProfilesInComments true /EmbedJobOptions true /DSCReportingLevel 0 /EmitDSCWarnings false /EndPage -1 /ImageMemory 1048576 /LockDistillerParams false /MaxSubsetPct 100 /Optimize true /OPM 1 /ParseDSCComments true /ParseDSCCommentsForDocInfo true /PreserveCopyPage true /PreserveDICMYKValues true /PreserveEPSInfo true /PreserveFlatness true /PreserveHalftoneInfo false /PreserveOPIComments false /PreserveOverprintSettings true /StartPage 1 /SubsetFonts true /TransferFunctionInfo /Apply /UCRandBGInfo /Preserve /UsePrologue false /ColorSettingsFile () /AlwaysEmbed [ true ] /NeverEmbed [ true ] /AntiAliasColorImages false /CropColorImages true /ColorImageMinResolution 300 /ColorImageMinResolutionPolicy /OK /DownsampleColorImages true /ColorImageDownsampleType /Bicubic /ColorImageResolution 300 /ColorImageDepth -1 /ColorImageMinDownsampleDepth 1 /ColorImageDownsampleThreshold 1.50000 /EncodeColorImages true /ColorImageFilter /DCTEncode /AutoFilterColorImages true /ColorImageAutoFilterStrategy /JPEG /ColorACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /ColorImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /JPEG2000ColorACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /JPEG2000ColorImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /AntiAliasGrayImages false /CropGrayImages true /GrayImageMinResolution 300 /GrayImageMinResolutionPolicy /OK /DownsampleGrayImages true /GrayImageDownsampleType /Bicubic /GrayImageResolution 300 /GrayImageDepth -1 /GrayImageMinDownsampleDepth 2 /GrayImageDownsampleThreshold 1.50000 /EncodeGrayImages true /GrayImageFilter /DCTEncode /AutoFilterGrayImages true /GrayImageAutoFilterStrategy /JPEG /GrayACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /GrayImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /JPEG2000GrayACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /JPEG2000GrayImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /AntiAliasMonoImages false /CropMonoImages true /MonoImageMinResolution 1200 /MonoImageMinResolutionPolicy /OK /DownsampleMonoImages true /MonoImageDownsampleType /Bicubic /MonoImageResolution 1200 /MonoImageDepth -1 /MonoImageDownsampleThreshold 1.50000 /EncodeMonoImages true /MonoImageFilter /CCITTFaxEncode /MonoImageDict << /K -1 >> /AllowPSXObjects false /CheckCompliance [ /None ] /PDFX1aCheck false /PDFX3Check false /PDFXCompliantPDFOnly false /PDFXNoTrimBoxError true /PDFXTrimBoxToMediaBoxOffset [ 0.00000 0.00000 0.00000 0.00000 ] /PDFXSetBleedBoxToMediaBox true /PDFXBleedBoxToTrimBoxOffset [ 0.00000 0.00000 0.00000 0.00000 ] /PDFXOutputIntentProfile (None) /PDFXOutputConditionIdentifier () /PDFXOutputCondition () /PDFXRegistryName () /PDFXTrapped /False /CreateJDFFile false /Description << /ARA /BGR /CHS /CHT /CZE /DAN /DEU /ESP /ETI /FRA /GRE /HEB /HRV /HUN /ITA /JPN /KOR /LTH /LVI /NLD (Gebruik deze instellingen om Adobe PDF-documenten te maken voor kwaliteitsafdrukken op desktopprinters en proofers. 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