Agency Costs in Small and Medium Wood Industry Enterprises with Full Operating Cycle and Cash Levels

Agency costs conception has moderating influence on decisions made in small and medium enterprises. A smaller amount of information available on small and medium-sized enterprises compared to information on large entities results in an increase in the cost of external capital. This phenomenon is called information asymmetry. It occurs when the various parties to the transaction (e.g., debtor and creditor) have different information on the subject relevant to the transaction (e.g. on the risk associated with the company). Agency conflict can also be more noticeable in companies where the owners are liable with all their assets for the actions of partners. At the end, such conflict is present between owner of the company and supplier of capital. If a small or medium-sized enterprise is financed by capital from friends, the cost of agency conflicts are lower and thus the cost of financing is lower. In paper such moderating influence is analyzed in wood industry firms with full operating cycle and cash levels. Analysis is illustrated by empirical data collected from firms operating in Slovakia, Poland and in surrounding countries.