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SME CREDIT RISK MODELLING IN SOUTH AFRICA: A CASE STUDY

Author(s): Mercy Marimo,Charles Chimedza / Language(s): English / Issue: 36/2022

Keywords: SME scorecard; consumer credit; reject inference; credit scoring;

This paper examined the funding conundrum by assessing the success rate of applications of small and medium sized enterprises (SME) for commercial bank funding. A quantitative group analysis was done on the overdraft obtained from one of the leading financial institutions in South Africa to determine the drivers of default. The SME scorecard was developed using logistic regression on credit applications over a seven-year observation period to analyse the default experience as part of credit risk management. The robustness, stability and relevance of an application scorecard is enhanced by the reject inference process and inclusion of bureau information. Small businesses operating in the service sector and having a long-standing rapport with the bank can easily access commercial bank funding. SMEs in the construction industry with a high number of credit enquiries are unlikely to survive the stringent conditions of the bank lending criteria. It is the prerogative of the principal business owner to honour their financial obligations across the credit industry if commercial bank funding is desired. Their credit quality, as reflected in the bureau information, forms the fulcrum of the SME application scorecard. The model developed in this study can be used as a tool to reduce defaults and serious delinquencies in boarding new applicants. Furthermore, the model can be applied to determine risk tendency and monitor the performance of SME credit portfolios.

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THE OPEN BALKAN AS A DEVELOPMENT DETERMINANT OF THE WESTERN BALKAN COUNTRIES

Author(s): Gojko Rikalović,Dejan Molnar,Sonja Josipović / Language(s): English / Issue: 36/2022

Keywords: development indicators; global indices; economic integration; Open Balkan; Western Balkans; EU;

The paper starts from the concept of the Open Balkan as a community of countries in the Western Balkans, aimed at strengthening their economic cooperation and development for faster integration in the European Union. Significant attention is paid to the analysis of the interdependence of (in)stability of the state and the economic development of small countries. The position of the Open Balkan and its members is also analysed on the basis of the selected global composite indices. An important subject of the analysis is also the condition of institutional capacities of the members of the Open Balkan and their institutional cooperation from the perspective of faster progress towards the European integration. Two main hypotheses have been tested in the paper: (H1) CEEs countries are not a homogeneous group of countries; and (H2) The Western Balkans is a relatively homogeneous regional integration. To test the convergence hypothesis between 16 Central and Eastern European countries (CEEs), annual data from World Bank’s database on the value of real gross domestic product per capita (in constant dollars 2017, PPP) in the period 2000-2026 were used (projected values for the period until 2026). We employed the method developed by Phillips & Sul (2007) that allows identification of clusters of convergence on the basis of an algorithm that is data-driven and thereby avoids a priori classification of the data into subgroups. Based on the results obtained, it can be concluded that Serbia is the “locomotive” of the Western Balkans and that all countries in this area should join the regional initiative for cooperation, the Open Balkan.

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MODELING THE INTERDEPENDENCE OF MARKETING AND ACCOUNTING INFORMATION SYSTEMS

Author(s): Perica Macura,Predrag Gajić / Language(s): English / Issue: 36/2022

Keywords: marketing information system; accounting information system; the model of interdependence of marketing and accounting information systems;

This paper presents a model of interdependence of marketing information system and accounting information system activities, with the aim of harmonizing them while identifying activities on the basis of which the goals of information support for the execution of managerial tasks are completed. The lack of effort to create such models in the past can be explained by the tendency to present individual information systems as integral and sufficient for management needs. However, the growing management informational dependence of a company implies the need for more efficient ways to create and deliver relevant information and reports. The proposed model is based on a general management concept according to which, under the contemporary business conditions, three general groups of activities are performed: research and monitoring of market requirements, creation of value for customers based on previously identified needs and customer relationship management, and customer lifecycle management. On the basis of such grouped management tasks, marketing and accounting activities and their mutual conditionality were identified and unified though the proposed model.

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FACTOR ANALYSIS OF NON-FINANCIAL MOTIVATORS FOR SUCCESSFUL MANAGEMENT AND PROMOTION OF THE COMPANY

Author(s): Jana Aleksić,Mirjana Landika,Bojana Kondić Panić / Language(s): English / Issue: 36/2022

Keywords: factor analysis; statistical model; successful management; advertising; management; motivational factors;

Factor analysis of non-financial motivators will be presented through a statistical model whose goal is to group factors. Composing a statistical model implies grouping the factors that determine the contributions of qualitative preference to business efficiency of the whole company. Empirical material is obtained by surveying the target group, and the response pattern to clarify the management problem is factor analysis. The purpose of factor analysis is to rationalize the number of dependent variables of business efficiency in relation to qualitative and quantitative requirements within the surveyed target group. Considering the modern lifestyle, it is reasonable to assume that general dissatisfaction level is increasing every day. This includes professional orientation, working conditions, leisure time management and all levels of interpersonal relationships such as collegial, friendly, partner and family relationships. It is reasonable to assume that within business systems there is a space for recognizing this dimension and its careful analysis that respects the non-economic dimension of employees’ (dis) satisfaction and manages business efficiency in terms of non-economic factors. This paper aims to present thorough analysis of grouped factors that are basically non-financial; they represent a group of spiritual factors that contribute to a better internal climate of the company. All this leads to a prosperous company management that can represent and promote the company in public well.

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MONEY SUPPLY, INFLATION AND ECONOMIC GROWTH IN BOSNIA AND HERZEGOVINA: AN EMPIRICAL ANALYSIS

Author(s): Branka Topić Pavković,Slaviša Kovačević,Drago Kurušić / Language(s): English / Issue: 36/2022

Keywords: money supply; M2; inflation; economic growth; currency board; Bosnia and Herzegovina;

The analysis of monetary variables and their impact on the economic growth rate has always been in the focus of economic research. In the broadest sense, economic theory distinguishes two basic views defined by the views of monetarists and Keynesians. Although the basic difference is reflected in the determination of price rigidity and money neutrality, specifics of modern economic systems shift the focus towards the positive influence of monetary on real variables. The aim of our research is to identify and quantify the impact of monetary variables on economic growth in Bosnia and Herzegovina. The research was conducted using data from the period 2000-2020. The paper starts with the hypothesis that money supply and inflation ultimately have a positive impact on the real economic growth in BiH. The money supply M2 and the annual inflation rate are taken as explanatory (monetary) variables in the research, while real growth is a dependent variable. The long-term relationship between monetary variables and real growth rates was tested, taking into account the specificity of the BiH monetary arrangement established in the form of a currency board. In order to prove the hypothesis, we applied econometric techniques such as VEC model, cointegration analysis, innovation analysis based on the impulse-responsive function, decomposition variance as well as a causality test. The research results showed the connection between the money supply and the inflation rate with the economic growth in BiH, the relation being positive and statistically significant in the long run. With this, we confirmed the initial hypothesis of the work.

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COMPARATIVE ANALYSIS OF OPERATIONS OF INVESTMENT FUNDS IN SELECTED COUNTRIES OF THE WESTERN BALKANS

Author(s): Milica Bojat / Language(s): English / Issue: 36/2022

Keywords: financial market; investment funds; savings; economic development; correlation analysis; comparative analysis;

Investment funds are gaining importance in recent times, since they allow small investors to reduce risk, use financial expertise, facilitate access to the international capital market and achieve a higher rate of return on investments compared to banks. The aim of this research is to show, in accordance with the available data and using comparative analysis, the similarities and differences in the operations of investment funds in Bosnia and Herzegovina, Serbia, Croatia and Montenegro, and to prove that these financial institutions, although they have potential, do not contribute to the economic development of these countries to the extent that they could. The object of the comparison is the nature of the origin, the number, the type, the net asset value and the percentage of the participation of investment funds in the GDP of the observed countries. The main hypothesis is that investment funds in analyzed countries do not represent a significant part of the financial system and, due to the nature of their creation, do not make a significant contribution to economic development. Two auxiliary hypotheses arise from the main hypothesis: investment funds, created in the process of privatization, due to the absence of essential market conditions for their establishment, are not able to achieve a significant impact on economic growth; the growth of the value of the investment funds assets does not affect the growth of the volume of investments in the country. In addition to the comparative analysis methods, the method of simple correlation analysis, as well as other scientific methods, will be used to prove these hypotheses. The results of the survey confirmed the hypothesis that investment funds do not represent an important part of the financial system in the analyzed countries today and, due to the nature of their creation, and do not make a significant contribution to the economic development.

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COVID-19 PANDEMIC AND FRAUDULENT ACTIONS IN THE FINANCIAL STATEMENTS: THE CASE OF HOTEL COMPANIES IN THE REPUBLIC OF SERBIA

Author(s): Marko Milašinović,Biljana Jovković,Predrag Dragičević / Language(s): English / Issue: 36/2022

Keywords: COVID-19; fraud; financial statements; hotel companies; Beneish M-score model;

The quality of information presented in the financial statements of companies may be impaired due to fraudulent activities. One of the frequently used instruments that indicates that fraud has been committed in the financial statements is the Beneish M-score model. The purpose of the research is to examine the exposure of hotel companies in the Republic of Serbia to the risk of fraud in financial statements, as well as to determine whether there has been a change in that risk due to the COVID-19 pandemic. The research was conducted on a sample of 100 randomly selected hotel companies, and their financial reports for 2019 and 2020 were observed. There was a high risk of fraud based on the recognition of costs of sales, management and administration, and borrowing in both observed years, as well as a high risk of fraud based on the recognition of income and gross margin index in 2020. Further, it was determined that in the year of the COVID-19 pandemic, there was an increase in the risk of fraud in the financial statements based on the gross margin index and recognition of selling, management and administration costs. Microenterprises are exposed to a higher risk of fraud based on the recognition of costs of sales, management and administration compared to medium-sized ones. Limited liability companies are more exposed to risk based on the recognition of sales revenue, accrual item and total risk (measured by the 8-variable model) compared to joint-stock companies. On the other hand, joint-stock companies are more exposed to the risk of fraud based on gross margin and general risk of fraud (measured by the 5-variable model) compared to limited liability companies.

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DOES TOURISM INFLUENCE FINANCIAL DEVELOPMENT IN KENYA?

Author(s): Mercy T. Musakwa,Nicholaus M. Odhiambo,Sheilla Nyasha / Language(s): English / Issue: 36/2022

Keywords: financial development; market-based financial development; bank-based financial development; tourism; Kenya; ARDL approach;

Objective: In this study, we investigate the impact of tourism on financial development in Kenya using time series data from 1995 to 2017. The study uses the autoregressive distributed lag (ARDL) bound testing approach to cointegration and error correction model to examine this connection. To increase the robustness of the results, the study uses two proxies of financial development, namely broad money (bank-based financial development proxy) and total value of stocks traded (market-based financial development proxy). Results show that tourism has an insignificant impact on financial development in Kenya – both in the short run and in the long run. The results are relevant regardless of whether the financial development is proxied by a bank-based financial development indicator or by a market-based financial development indicator. This finding points to the fact that, although tourism is one of the main sources of foreign exchange in Kenya, it has no direct impact on financial development. The findings from this study add value to policy makers in Kenya by revealing the insignificant impact that tourism has on financial development, although this is in contrast to other studies that found a positive contribution. Based on the findings, Kenya may not anchor its financial development policies on tourism.

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ESTIMATING THE GROSS DOMESTIC PRODUCT OF NIGERIA DURING MILITARY AND CIVILIAN REGIMES: A CHOW TEST

Author(s): Abidemi Abiola,Rasak Adetunji Adefabi / Language(s): English / Issue: 34/2021

Keywords: gross domestic product; military regime; civilian regime; Chow test;

Gross domestic product is the commonest economic variable that is used to measure economic performance, either for intertemporal or international comparison. Nigeria as a country has been ruled since independence by two sets of regimes: the military and the civilian. Arguments were and still are concerned with which of the two regimes favoured the country economically. The study therefore estimates the gross domestic product of Nigeria using Chow test. The essence of Chow test is to determine if there was structural break from the point the country fully began civilian dispensation from the previous military regime. Using both the F statistic and the Chow test, the results show that there was indeed structural break between the military regime and the civilian regime. This result was further confirmed by the Cusum Square test that shows that the overall model was unstable before the correction. The results further show that out of five components of aggregate demand, four of the variables have coefficients higher during the civilian than the military regime. The study therefore concluded that civilian rule is better economically than military rule in Nigeria. It was recommended that politicians and political office holders should act within the ambit of the law to sustain the democracy the country is currently enjoying.

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BUSINESS GROWTH MANAGEMENT IN REPUBLIC OF SRPSKA

Author(s): Saša Vučenović,Branka Zolak Poljašević,Igor Mišić / Language(s): English / Issue: 34/2021

Keywords: management; enterprise growth; sustainable growth rate; growth measurement;

The research methodology starts from the calculation of the coefficient for each individual company in order to obtain the indicators by calculating the arithmetic mean, median and quartile. As econometric stochastic models have little value for predicting or explaining the growth process at the level of individual companies, the central subject of interest is understanding the growth process at the level of an individual company. The sustainable growth rate of a company depends on the activity of the company. Numerous factors can affect the growth of a company, but the influence of individual factors on the growth of a company is rarely significant and permanent. The results of the research indicate a very asymmetric distribution of the size of enterprises, with a small number of large enterprises and a large number of small enterprises. The model of sustainable growth is an effective tool for financial planning and directing business policy towards stimulating growth in certain industries.

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THE STRATEGY OF INCREASING PRODUCTION COMPETITIVENESS IN FOOD INDUSTRY OF THE REPUBLIC OF SRPSKA BY STIMULATING A NEW PRODUCT DEVELOPMENT

Author(s): Slavica Grujic,Mirjana Grujčić / Language(s): English / Issue: 34/2021

Keywords: food industry; production competitiveness; new product development; healthy diet;

Food processing enterprises could ensure production competitiveness by improving product quality and harmonising it with consumer requirements. The noncommunicable diet-related diseases have been increasing rapidly among consumers in the last decade as well as the impact on people’s attitudes towards nutritional aspect of the quality of food products and healthier diet. The aim of this paper is to illustrate the methodology for increasing production competitiveness in food industry of the Republic of Srpska, based on consumer-oriented food product development and healthy diet. The structured questionnaire and scientific methods were used in young consumer representatives’ research regarding food product development in the target market. Exactly 720 participants were recruited from public educational institutions in the Republic of Srpska. The descriptive statistics and correlation were used for the data analysis. The results indicated positive statistically significant correlation coefficients (p<0.05) between consumer interest in new products and: healthy diet preferences; product ingredients; product higher nutritive value (vitamins, minerals, dietary fibres content); fruit, fruit juice and low-energy beverages consumption. Also, knowledge on diet-related diseases was in significant positive correlation with them. The data analysis revealed that an increase in production competitiveness could be assessed through developing food products based on nutritive elements, modelling and consumer interest in new food products with higher nutritive quality.

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MODERN TECHNOLOGIES AS A DETERMINANT OF SUSTAINABLE ECONOMIC GROWTH AND DEVELOPMENT OF SMALL OPEN ECONOMIES: POTENTIALS, CHALLENGES AND POSSIBLE RESPONSES

Author(s): Radomir Božić / Language(s): English / Issue: 34/2021

Keywords: ICT; industry 4.0; innovation; economic growth; productivity; business processes and models; small open economies;

The modern age is characterized by strong development and application of information and communication technologies (ICT) and Industry 4.0, which determine significant changes in the economy and society as a whole, and especially affect production and business processes, economic growth and development, productivity, business models, required qualifications and workers’ skills, the education system, as well as people’s daily lives. Thanks to that, developed countries are already achieving significant effects in terms of efficiency, productivity, flexibility, gross domestic product (GDP) and living standards growth, and there are opportunities for small open economies to create their own approaches to accelerate growth and convergence with developed countries. Otherwise, the negative consequences known as digital sharing are also possible. The aim of this paper is to present, based on relevant literature and experiences of individual countries, the potentials, challenges and possible responses of economic and business policy makers aimed at the application of ICT and Industry 4.0 in small open economies, such as the Western Balkans. The paper is structured as follows: Introductory remarks - elaboration of the theoretical basis, characteristics and implications of ICT and Industry 4.0 on the economy and society as a whole; Methodology - review of relevant current literature; Results - presentation of basic potentials, challenges and possible responses of small open economies in the function of accelerating economic growth; and Discussion - concluding remarks and recommendations for possible responses.

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PREREQUISITES FOR ACCOUNTING SUPPORT IN APPLYING DIFFERENTIATION STRATEGY

Author(s): Predrag Gajić / Language(s): English / Issue: 34/2021

Keywords: competitiveness; competitive strategy; management accounting; quality costing; feature costing; target costing; activity based costing;

The paper is based on the thesis that the company competitiveness should be built on the basis of accounting support to strategic choices. Competitiveness at the single company level is, for the most part, a consequence of management activities. More recently, modern management concepts are available to them, which also require adequate information support. Hence, the content of the defined topic was intended to present the possibilities of accounting information support in achieving and measuring competitiveness, as identified based on customer attitudes about the key factors for company’s market success. Achieving such an aim would contribute to identifying the criteria of accounting information system success in achieving desired market position, but also in promotion, to a great extent neglected possibilities of this part of information system, in domestic companies. Required adequacy of information support is presented in the form of accounting instruments which can help in setting and implementing differentiation strategy.

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GLOBAL DEVELOPMENT OF THE ECO-INDUSTRY SECTOR

Author(s): Maria Kaczmarczyk / Language(s): English / Issue: 34/2021

Keywords: eco-industry; green economy; sustainable development; green growth;

Eco-industry has become an equal and recognized economic sector developing in all economic systems in the world. The main reason of its creation was the worsening state of the natural environment in the second half of the twentieth century and also the growing ecological awareness of the contemporary societies. However, the differences in its production level and the resulting regional specializations in its scope in the recent decades are determined by a number of economic, technological and institutional factors. The article discusses the functioning definitions and difficulties in their development and application, as well as the sources of the data on the size of the eco-industry sector in the world. In addition, calculations regarding the growth rate of the eco-industry sector in 1996, 2004, 2012 and 2017 and its internal global industrial structure in 2016 were presented. In the final part of the work there were given and analysed the reasons and consequences related to the explanation of the different production volumes of the eco-industry sector in various countries of the world.

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COVID-19 PANDEMIC CHALLENGES TO MICRO, SMALL AND MEDIUM ENTERPRISES IN NIGERIA: STRATEGIC OPTIONS FOR SURVIVAL

Author(s): Waidi Adeniyi Akingbade / Language(s): English / Issue: 34/2021

Keywords: COVID-19 Pandemic; crisis management response; economic downturn; MSMEs; survival strategy;

COVID-19 Pandemic posed a great threat and challenges to the business world, especially the Micro, Small and Medium Enterprises (MSMEs). Many of these enterprises suffered a great downturn in business activities and reduction in profit volume. Many of them were forced to close down while others survived on the margin. The government and other stakeholders in the MSMEs have provided solutions to their problems but most of them have not really yielded the desired result. This paper investigates the challenges that MSMEs in Lagos State encountered as well as the strategic options for their survival during the Covid-19 Pandemic era. A survey research design was adopted and primary data were collected with the help of questionnaire. The population of study was 3,224,324 registered MSMEs in Lagos State, while the sample size of 400 was determined with Yamane (1967) formulae. A simple random sampling technique has been employed to administer 400 copies of questionnaire out of which 297 were properly filled and returned. The findings from the regression analysis and the descriptive statistics revealed that there is no significant effect of MSMEs Covid-19 challenges (such as: decline in productivity, business closure, supply chain breakdown, low customer demand, reduction in profit volume, self-isolation, reduced opportunities to meet new clients) on business survival. Also, it was revealed that most of the respondents adopted cutting expenses as a strategic option for the survival of their businesses. However, the study concluded that Covid-19 Pandemic is a major threat to MSMEs survival and growth. It was recommended that MSMEs should embark on cutting expenses in order to survive Covid-19 and further, they should embrace crisis management response, finance and liquidity, operation and supply chain, determine and activate the business continuity plan, monitor the implementation to enhance their survival and readjust their response approach towards environmental changes.

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CLIMATE CHANGE AND ECONOMY IN NIGERIA: A QUANTITATIVE APPROACH

Author(s): Musibau Ojo Adejumo / Language(s): English / Issue: 34/2021

Keywords: economic growth; global warming; carbon dioxide; climate change;

This study has examined the potential impacts of climate change on Nigerian economic growth using a time series data (1980-2017). In doing so, an econometric model has been constructed based on theoretical and empirical literatures of the climate change economics, then it has employed a growth model adapted from the Solow growth model. The research work found that annual average rainfall has a significant effect on economic growth both short-run and long-run. Also, there is a high degree of positive and significant relationship between carbon emission, foreign direct investment, gross fixed capital formation and economic growth under investigation. The result also revealed that this relationship between climatic factors and economic growth is more noticeable in the long run. In addition, an inverse relationship was found between forest depletion, population growth and economic growth in the long run. Finally, there is unidirectional causality between annual average rainfall and economic growth in Nigeria. It is therefore recommended that the stakeholders and the general public should build green economy that enables sinking carbon and promotes carbon market in the long-run.

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CONFLICT OF STRATEGIES – BOSNIA AND HERZEGOVINA DEVELOPMENT STRATEGY AND SUPPORT STRATEGIES OF INTERNATIONAL FINANCIAL INSTITUTIONS

Author(s): Miroljub Krunić / Language(s): English / Issue: 34/2021

Keywords: development management; public debt; business environment; fiscal sustainability; competitive ability; economic development strategy; balance of payments deficit; currency board;

Over the past twenty five years, Bosnia and Herzegovina has been experiencing, with more or less oscillations, low and stagnant economic growth. Planning and economic policy documents shaped the vision of rapid transition and successful economic growth, which was supposed to enable the sustainability of the economic system and its elements. The strategic commitment to integrate into the European Union system has not changed. It was confirmed by signing the Stabilization and Association Agreement in 2008. International financial institutions have even provided financial support to the economic programs in BiH and its entities to an extent greater than their capacity to use, but below the economic needs of the country as a whole. In these circumstances, the issue of a possible conflict between the economic development goals of Bosnia and Herzegovina and the objectives of financial support provided by the international community has been raised. Circumstances such as a long period of time, modest economic performance, lost opportunities and dangerous negative trends indicate the need to reconcile the conflicting strategies and interests of two parties - Bosnia and Herzegovina and the international community

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PROFITABILITY OF AUDIT COMPANIES IN THE REPUBLIC OF SERBIA: EMPIRICAL RESEARCH IN THE PERIOD 2010-2019

Author(s): Biljana Jovković,Nemanja Karapavlović,Aleksandra Radojević / Language(s): English / Issue: 34/2021

Keywords: audit company; profitability; audit services; ROA; net income;

The subject of the research in the paper is profitability assessment of audit companies operating in the Republic of Serbia. The objective of the research is to provide the answer to professional and scientific public whether the profitability of audit companies is conditioned by the impact of the size of audit company, origin of its equity or the existing market participation? The research included the entire population of active audit companies in the Republic of Serbia in the period from 2010 to 2019. Data analysis was performed in the statistical program SPSS, and nonparameter tests Kruskal-Wallis H test and Mann-Whitney U test were used. The research will give the answer to the question whether the profitability of an audit company depends on the source of its equity, the size or market participation it has in provision of audit services. The results of the research have shown that there is an impact of the size of the company, the origin of its equity and market participation on the profitability of audit companies measured by net income and return on total assets.

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CREDIT POLICY OF BANKS IN THE FUNCTION OF DEVELOPING THE ECONOMY OF REPUBLIC OF SRPSKA

Author(s): Dragan Bašić,Predrag Ćurić / Language(s): English / Issue: 34/2021

Keywords: banking sector; credit rating; financial discipline; credit policy; credit risk;

The banking sector of Republika Srpska features a high level of legal and regulatory compliance, and can be defined as conservative banking with deposits as the main source of business and loans as their fundamental product. The availability of funds for lending under favourable conditions in the economy is the fundamental and most important function provided by the banking sector, even though its role is crucial in executing payment transactions as well as providing security in savings products. As per expectations, quantitative analysis shows a very high level of correlation between the changes in the volume of bank loans and the changes in the gross domestic product in Republika Srpska. On the one hand, the credit policy of banks represents an important basis for the development of enterprises and the economy, and for the business of banks, on the other. Banks obtain the highest revenues from the active interest rates, and through defining an adequate credit policy with respect to the conditions existing in the economic environment, they can make their operations more secure and profitable. By using the data from the survey questionnaire, we investigated the extent to which the credit policy of banks affects the financial stability and business operations of companies in Republika Srpska.

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ANALYSIS OF THE IMPACT OF SOCIAL NETWORKS ON THE QUALITY OF LIFE AND EDUCATION OF YOUNG PEOPLE

Author(s): Jelena Jevtić,Milan S. Dajić / Language(s): English / Issue: 34/2021

Keywords: social networks; Instagram; YouTube; young people;

Social networks are a way of creating a virtual identity and entering into relationships with strangers in a series of interactions that were not known to a man before the existence of the Internet. Mobile phones and the virtual world often create a personality of a person that is not the same in the real world. It can be said that technology has changed the course of humanity and human consciousness and contributed to many changes in the mentality of society, especially among the youth. Children are often overwhelmed by materialism and jealousy, which further encourages them to become an unconscious, immoral and unambitious population. One of the negative effects of social networks is the abuse of privacy, which is also becoming a growing problem everywhere in the world and should not be ignored. However, a positive attitude should be maintained when it comes to social networks, because they facilitate communication, access to information and learning, greater availability of services and free advertising of some products or services. High school students use the Internet intensively every day, and the work raises the question of whether they use it constructively or destructively. The research was conducted in 2019, the population of high school students was observed and 100 students were included on the territory of Belgrade, Niš and Vitina.

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