Author(s):
1. Tajana Serdar, Ekonomski fakultet Univerziteta u Banjoj Luci, Republic of Srpska, Bosnia and Herzegovina

Abstract:
THE COST OF CAPITAL IN THE REPUBLIC OF SRPSKA MSc Tajana Serdar MSc Dijana Sredić Abstract The price of capital by definition is compound of the price of shareholder capital (dividend rate) and the price of loans (interest rate). In this paper the focus is on the price of the capital in the Republic of Srpska. Researching published data, there are few joint share companies which pay dividends to their shareholders. Therefore, the interest rate is the most important part of capital price in the observed country. To face with financial crisis the state government has adopted set of measures to decrease the negative crisis effects on a national economy and the most important role in that policy is confined to the development funds. It is symptomatic that first development funds from the domestic sources were founded in 2006, but became operative in 2008, at the beginning of global financing crisis. The purpose of this paper is to compare the price of capital before and after beginning of the crisis, that corresponds to the comparison of the level of interest rates before and during the establishment of development funds. The dividend payments are insignificant, but there will be shown a review of payments in the relevant time period. In this paper it will be discussed the market share of development funds in the total credit portfolio of banking sector in Republic of Srpska and the interest rates of loans from development funds and the average interest rate in banking sector. The two hypotheses are going to be proved. The first one is that market share of the developing funds has a tendency of increasing as the growth rate of the country is decreasing. The second hypothesis is that with introducing the development funds the average interest rate decreases and furthermore the lowest interest rate boundary is moved down. The testing of these hypotheses will be undertaken with the usage of correlation and regression analysis. Afterwards, it will be presented the ways of financing from state funds in neighbor countries with particular data concerning the terms of loans. In conclusion, we are going to display results of proving hypothesis and give the overview of possible ways of loans condition's improvement. Also, there will be demonstrated that the main cost of capital in the transition countries is the interest rate.

Key words:
cost of capital, interest rate, development funds, capital structure

Date of abstract submission:
22.06.2012.

Number of visits:
444

Conference:
REDETE 2012

Applied paper from author