Factors Affecting Decision Makers Preference of MSMEs in Financing Sources Choice (original) (raw)
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2017
The study aims to discover the factors affecting capital structure decisions of micro and small enterprises (MSEs) and develop a model of capital structure determinants. The study employed indepth and face-to-face interviews and focus-groups discussions to validate the existing concepts that have been identified in the literature within the Asian context, specifically the Malaysian MSEs. The inter-rater reliability technique was used to analyse the data. The results indicate that the large proportion of respondents relied extensively on the internal finance during start-up stage and in subsequent years. The results identified 13 factors of capital structure choice which are consistent with major studies on the capital structure determinants. This study reveals two new determinants of capital structure, namely ‘awareness’ and ‘business culture’ and some new items which can be included in the existing constructs. The research findings should help managers to make optimal capital struc...
International journal of academic research in business & social sciences, 2022
It is theoretically acknowledged that decisions on capital structure remain an important goal to maximise returns. This study seeks to identify factors influencing the capital structure of Malaysia's small and medium enterprises (SMEs) through re-assessment of the operationalisation of constructs and an evaluation of certain assumptions on capital structure choices. An analysis of 500 questionnaires from SMEs located in the central region of Peninsular Malaysia was considered in the context of reliability and validity concerning capital structure determinants. The finalised model of capital structure consists of 11 constructs and 40 items. The results of an exploratory factor analysis (EFA) confirmed that external factors such as culture and environment also influenced the capital structure choices of SMEs. Prospective research could validate the framework proposed in this study and establish the framework as a standard measurement exercise to assess SMEs' capital structure determinants. This study also presented policy implications for strategies to manage, preserve, and enhance economic systems, legal and tax frameworks, and inflation rates that may aid SMEs in accessing different financial sources.
The theory of capital structure , Sermaye Yapısının Belirlenmesi
hanges in Capital Structure of Czech SMEs: A Dynamic Panel Data Approach , 2013
In this paper, we explore two of the most relevant theories that explain the financial policy in small and medium enterprises (SMEs): pecking order theory and trade-off theory. The theoretical section provides an overview of contemporary theories of capital structure. According to the pecking order theory changes in the level of debt are not motivated by the need to reach a given debt target, but instead are motivated by the need for external financing. In the trade-off theory, companies identify their optimal capital structure and weigh up the advantages and disadvantages of an additional monetary unit of debt. Panel data methodology is used to test the empirical hypotheses over the sample of 260 Czech SMEs during the years 2004-2011 using annual data. To test pecking order theory and trade-off theory we use total debt ratio as a dependent variable and independent/explanatory variables depending on previous literature that corresponds to specific company characteristics. The results suggest that both theoretical approaches contribute to explaining capital structure in Czech SMEs and identifying major forces that lie behind their indebtedness. ifrs smes , list of smes
An evaluation of current capital structure decisions of Turkish SMEs
Pressacademia
Findings of this study suggest that Turkish SMEs happen to experience obstacles in raising finance to improve and develop their business environment. In particular, as information asymmetry and uncertain economic environment are the key barriers, financial constraints turn out to be main handicap for SMEs' survival. Despite its own merits, SME owners, in family business case, are reluctant to take external finance for their projects with the intention not to lose their independence and control. The main purposes of this study are firstly to investigate the issue of financing of SMEs in Turkey in the theoretical context and secondly to make policy suggestions for the future. Miller and Modigliani (1958)'s basic capital structure theory, Myers, (1984)'s trade off theory, and Myers and Majluf (1984)'s the pecking order theory are the key standing theories to examine SMEs' capital structure needs. The results of this study are similar to those reported for most Western economies that owners of SMEs follow a pecking order theory and prefer retained profit to external finance in order to cover their financing gaps.
Jurnal Ekonomi dan Perbankan Syariah
This study aims to determine what factors influence MSMEs in taking business capital financing at a sharia financing institution, peer to peer lending namely qazwa.id. This study uses a descriptive qualitative method with a non-probability namely sampling technique, purposive sampling. The results of this study indicate that there are three factors that influence MSMEs in taking business capital financing in qazwa, namely easy and fast access to financing, margins and the sharia system. Among these three factors, the factor that greatly influences MSMEs in taking business capital financing at qazwa is the sharia system used by qazwa, namely mudharabah and murabahah contracts as evidenced by the results of interviews the majority of 4 out of 10 respondents chose it.
Cogent Business & Management, 2021
Previous studies have identified various factors underlying firm financing structure especially in large firms. However, few have attempted to document the reasons for financing preferences among microenterprises in developing countries. Employing a managerial-based theory, this study explores the financing preferences of microenterprises and factors that influence their preference towards external financing. Based on 310 valid replies to a questionnaire survey conducted among Malaysian microenterprises, it finds a clear financing hierarchy where internal funding sources are preferred to external finance. It also underscores the important role of external financing sources. Applying structural equation modelling, the study demonstrates that information on external financing, level of internal funding, growth intention, networking ties and owner's experience exert significant effects on external financing preferences. In addition, business age and the relative location of a business from banks and/or finance agencies appear to have a significant confounding influence on the results. The empirical evidence contributes to the limited but growing literature on financing preferences by revealing the
The Determinants of the Capital Structure: An Applied Study on SMEs in the City of Meknes-Morocco
ATHENS JOURNAL OF MEDITERRANEAN STUDIES, 2020
This article aims to present the determinants of the debt of Small and Mediumsized Enterprises' (SMEs') in the city of Meknes. To test the research hypothesis, a sample of 47 non-listed SMEs has been compiled and a static multiple regression model is developed. The result of the regression obtained indicates that size, profitability, and risk negatively influence the SMEs' debt. Whilst profitability and commercial debt are positively associated with debt. Industrial SMEs' use more debt compared to commercial SMEs'.
2015
Purpose – The purpose of the article was to examine the determinants influencing the capital structure in groups of micro, small and medium-sized enterprises. We tested if company type, effective tax rate, profitability have an impact on debt ratios. Design/methodology/approach –We employed two debt ratios: the share of total debt and interest debt in capital. The study was conducted on the basis of 12,000 SME financial statements. The inference was carried out with the use of the Student’s t-distribution and ANOVA Findings – It was confirmed that micro, small and medium company’s capital structure is affected by the organizational and legal form. We did not find a correlation between debt ratio and profitability and also effective tax rate and thus the trade-off theory is not useful to explain the motives of borrowing in this group of enterprises. Originality/value – There is a limited number of studies on determinants of SME capital structure in Poland, especially on a large sampl...
The Determinant Factors of Micro, Small, and Medium Enterprises Towards Financing Source Decision
2019
A country can be considered developing if the total number of entrepreneurs reaches 4% of the total population. Up until now, total number of entrepreneurs in Indonesia only reaches 3.31% of the total population and more than 99% of them are Micro, Small, and Medium enterprises while the rests are big corporations. SMEs give a significant contribution to the country’s economies. They contributed 58.65% to the national gross domestic product and fashion industry is awarded as the second largest contribution to the national GDP. They contribute up to 166,135.30 million rupiah to the national gross domestic product. However, starting a new business is a difficult process, especially when it comes to financing constraints. Most SMEs have limited sources to run and scaling their business. This circumstance occurs because entrepreneurs do not really know what to be concerned in deciding the financing source for their business, while financial planning and management are the important thin...