Causes and solutions for financial failure of enterprises in Turkey

Abstract

Introduction It is inevitable that the basic structural problems of macroeconomy will affect microelements of the economy such as firms and enterprises. Problems such as high inflation rate, budget, and current account deficit affect the internal and external value of the local currency. Macroeconomic problems impact the entire economic structure through the financial system. Hence, the pricing used by the financial system to mediate the transfer of resources between all segments of the economy is shaped by the problems of the macroeconomic structure. The financial structure with budget and current account deficits and insufficient domestic saving rate immediately affect the economic policies and hence the working conditions of the enterprises. This interaction of fragility mentioned above is very quickly experienced in the Turkish economy. Fragilities in the macro-economy is directly transferred to the financial system. Then, they affect the real economy through the financial system. For example, loan restructuring demands and concordatum applications of firms increased in parallel to financial difficulties experienced by enterprises in accordance with rise in the macro-economic problems. The financial difficulties of firms, which occur when the firms have difficulty in fulfilling their current liabilities or their assets become unable to meet their liabilities, affect especially the lenders, creditors, shareholders, and other related parties. In general terms, the reasons for the failure of the enterprises are perhaps hidden in market conditions at the establishment phase of firms. Establishment of an enterprise in a sector with excess supply may…. © Peter Lang GmbH Internationaler Verlag der Wissenschaften Berlin 2019.