The Survival of Small and Medium Business (original) (raw)

Polish Journal of Management Studies, 2019

Abstract

Small and Medium Businesses (SMEs) in developing countries are always associated with economic and social problems (for example: poverty, unemployment, economic inequality). Therefore, the development of this business is expected to contribute positively to these issues. In order to realize this, SMEs must be sustainable, at least they must be able to avoid financial distress. Financial distress occurs when a company is unable to fulfill its obligations. This study aims at analyzing the survival time and determinants of financial distress from SMEs in Indonesia. Purposive sampling used in the data of companies listed on the Indonesia Stock Exchange produced 34 samples of SMEs. The survival analysis used because it is more consistent and accurate. The Cox Hazard Model was used and found the fact that for SMEs in Indonesia, the probability of experiencing financial distress after eight years was small. Age and Net working capital to total assets negatively affected financial distress, while inflation and economic growth had a positive effect on SMEs financial distress in Indonesia. Therefore, it is important for companies to survive for up to eight years by having optimum working capital, since macro factors are difficult to control by the companies. The policy makers are recommended to keep monitoring inflation and economic growth so that Indonesian SMEs can survive.

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