relatively younger, more highly leveraged, and more profitable and faster growing firms. This suggests that a new type of firm might be emerging in transition economies that is more market- and profit-oriented. But at the same time, these firms appear to have financial constraints that impede their access to long-term financing and ability to grow.

In addition, there have been a number of World Bank surveys of SMEs in Eastern Europe; e.g. Chaves, Sanchez, Schor and Tesliuc (2001) in Romania and Broadman and Recanatini (2001) in Russia. Other World Bank studies have examined the determinants of capital structure of Bulgarian firms (Budina, Garretsen and De Jong (2000)), Hungarian and Polish enterprises (Cornelli et. al. (1996)), and Romanian (Carare and Perotti (1997)) and Hungarian companies (Colombo (2001)).

# **<u>Section 3: Data Description</u>**

# **_Firm Distribution_**

We use the Bureau Van Dijk “Amadeus” dataset to extract firm-level information on private and publicly owned non-financial Polish firms. The Amadeus database is a comprehensive source of firm-level financial and ownership information, mostly collected from the National Court Register. The data include only limited liability companies and PLC registrations that are required to submit annual filings, and excludes sole-proprietors and partnerships.<sup>5</sup> The database contains detailed financial and accounting information for each firm, including balance sheet and profit and loss statements, along with other firmspecific data such as year of incorporation, official address, legal form, auditors, number of employees and industry codes. There is also ownership information for the most recent year of data that includes details on the largest shareholders (all shareholders with more than 5% equity stake), such as reporting name, equity stake and country of origin, as well as details on subsidiaries. It is important to note that the coverage of data in Amadeus is dependent on the successful collection of information by the Polish National Court Register. In addition, the data exclude firms in the informal sector.

Until 1996, Amadeus included predominantly large and listed companies. Since 1998, the coverage of small and medium enterprises has increased substantially. We therefore exclude all years prior to 1998, so as to obtain a balanced number of firms in various size categories within the sample. In addition, we excluded 2003, since data coverage is very sparse. We also drop all firms that have missing assets and sales information, which is critical for creating financing ratios and identifying size categories. Since the study covers the years 1998-2002, the number of observations varies significantly during the period, going from 5,757 observations in the year 1998 to 15,315 in the year 2002.

> 5 Sole-proprietors and partnerships are required to register with local municipal offices.  The owners are required to file the name of the firm and the names of owners, although this information is kept confidential. In addition, firms must file annual tax receipts, which certify that taxes have been paid and that the firm continues to exist.  Creditors may inquire only whether the firm is registered and has paid its taxes.  No financial information or current ownership information is filed.

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