Capital Growth,Financing Source and Profitability of Small Businesses: Evidence from Taiwan Small Enterprises

This paper examines the relationship between profitability and financial capital for 1,276 small firms in Taiwan over the period 1992–1997. The results indicate a statistically positive relationship between profitability and capital growth. When financial capital is further divided into debt and equity, the results indicate a significantly positive relationship between profitability and equity financing, but a significantly negative relationship between profitability and debt financing. Moreover, the profitability of small firms is positively related to both the external economic conditions and the firms previous profitability.     

Female‐Led High‐Growth: Examining the Role of Human and Financial Resource Management

We integrate research on upper echelons theory, the resource‐based view, and gender to explore conditions that facilitate high growth for female‐led firms. We argue that female entrepreneurs have certain advantages that help them leverage their firms’ human and financial capital to achieve high growth. In support, using a sample of U.S.‐based entrepreneurial firms, we found evidence that having a female lead entrepreneur positively moderated the positive relationships between indicators of firms’ human and financial capital and high growth. The findings have implications for programs, policies, and practices to encourage more high growth in firms with female lead entrepreneurs.     

Outward FDI and profitability of emerging economy firms: Diversifying from home resource dependence in early stage internationalization

We investigate the effect of conducting FDI on the profitability of emerging economy firms in early stage internationalization. We argue that FDI can be an effective strategy to alleviate liabilities of emergingness, thus generating positive performance outcomes. We hypothesize that, contingent on factors altering motivation and capability of firms to diversify from home resource dependence, emerging economy firms can benefit from conducting FDI, resulting in a greater rate of intangible assets growth and enhanced profitability. Using panel data of Chinese firms prior to the global financial crisis, and through combining matching techniques with difference-in-difference analysis, we find empirical support for our arguments.     

What determines success? examining the human,financial, and social capital of jamaican microentrepreneurs

This research examines the performance of 215 informal microenterprises in Jamaica, studying the influence of human capital, social capital, and financial capital of the owners on their business profitability. Understanding the importance of particular relationships that result in successful micro-businesses is important for a number of reasons. First, among many developing countries, the growth of microenterprise provides the most visibly vibrant and growing economic activity. Although considerable effort and resources are being directed toward microenterprise promotion schemes, empirical research on the subject is quite limited. Second, economies in developing countries mirror many of the social and institutional problems existent in urban economically disadvantaged areas of the United States and other developed countries. For these areas, microenterprise may be an essential component of urban renewal and community development. This study helps in identifying important characteristics of social and individual attributes that may be relevant to those attempting to strengthen this subsector. Finally, this study seeks to provide insight into a dimension of microbusiness research for which there are limited data, specifically, the role that social capital plays among practicing entrepreneurs and owners.This research found that different structural environments, even within a singular and small economy, may considerably alter the rates of return to human, social, and financial capital. As a result, the analysis of enterprises includes segmentation according to both the usage, or not, of employees, and the sophistication of the technologies used.Several factors were determined to enhance the profitability of the businesses in all categories. Vocational training, for example, demonstrated consistently strong and positive effects. Mother’s high occupational status (a proxy for socioeconomic status) and years of experience in the business were also consistently positive and strongly associated with increasing profits.Although additional starting capital played an important role for both the businesses with and without employees, increasing amounts failed to differentiate the success of those firms that were already operating in the higher technological tier. Obtaining a small business loan acted in a similar manner, enhancing the profitability of all firms, except those segmented into a high technological tier. One interpretation of this finding is that the role of technological choice is extremely important, and appears to dwarf that of varying amounts of starting capital.Social capital, as operationalized by frequent church attendance and marital status of the owner, was found generally to increase the profitability of the business. The data demonstrate that social networks play an important role in the success of these businesses, and that conditions in the highest tier utilize social capital in a somewhat unique manner.     

Small firm growth,access to capital markets and financial structure: Review of issues and an empirical investigation

This article investigates the financial structure of small firms with an emphasis on growth and access to capital markets. Neo-classical economic, life cycle, pecking order and agency theory perspectives are reviewed in order to formulate testable propositions concerning levels of long-term, short-term and total debt, and liquidity. Up-to-date financial data were collected from the U.K. Private+ database for a large sample comprising of both listed and unlisted small firms. Regression results indicate significant relationships between financial structure and profitability, asset structure, size, age and stock market flotation but not growth except when rapid and combined with lack of stock market flotation. Analysis of stock market flotation as an interactive dummy reveals major differences between listed and unlisted small firms. The results indicate that the variety of financial structures observed in practice may reflect rational trade-offs of various costs on the part of small firm owner-managers but that the over-reliance on internally available funds and the importance of collateral, in the case of unlisted small firms, are likely to be major constraints on economic growth.     

我国制药行业上市公司资本结构的实证分析

2001年以来,医疗制度改革、GMP达标、加入WTO及OTC市场竞争的加剧等,使我国制药企业的产业环境发生了巨大变化,进而对制药企业的融资策略及资本结构决策行为也构成影响。在此背景下,本文以2002年深沪两市制药行业上市公司为样本,对影响我国制药行业上市公司资本结构的主要因素进行了实证分析,结果表明:增长期权对债务筹集能力显著正相关;销售费用融资主要来源于长期资本;规模对公司债务筹资能力具有正效应;公司的资产担保价值与长期负债比率正相关;产生内部资源的能力与短期债务间存在相互替代性;成长性、经营风险、非债务税盾和投资对资本结构的影响不大。     

Financial Policy and Capital Structure Choice in U.K. SMEs: Empirical Evidence from Company Panel Data

This article utilises up-to-date financial panel data, and investigates the capital structure of small and medium sized enterprises (SMEs) in the U.K. Different capital structure theories are reviewed in order to formulate testable propositions concerning the levels of debt in small businesses, and a number of regression models are developed to test the hypotheses.The results suggest that most of the determinants of capital structure presented by the theory of finance appear indeed to be relevant for the U.K. small business sector. Size, age, profitability, growth and future growth opportunities, operating risk, asset structure, stock turnover and net debtors all seem to have an effect on the level of both the short and long term debt in small firms. Furthermore, the paper provides evidence which suggest that the capital structure of small firms is time and industry dependent. The results indicate that time and industry specific effects influence the maturity structure of debt raised by SMEs. In general terms, average short term debt ratios in SMEs appear to be increasing during periods of economic recession and decrease as the economic conditions in the marketplace improve. On the other hand, average long term debt ratios exhibit a positive relationship with changes in economic growth.     

Human and financial capital as determinants of biopharmaceutical IPO de-listings

The present study combines human capital theory with work on IPOs related to sources of financial capital of recent, publicly traded biopharmaceutical firms and relates this to the de-listing of these firms. The study follows the generally accepted view that more or better quality human capital is a positive factor in individual and firm performance to develop the hypotheses, positing a negative relationship between these factors and IPO de-listing. The results show that to a limited extent firms having CEOs with more or better human capital and strategic alliance partners are associated with biopharmaceutical IPOs’ de-listing. The study further finds that de-listing in this industry is due primarily to acquisitions (and not financial distress) and that the findings differ based upon whether examining financial distress or acquisition de-listings. The study draws upon the IPO motivation literature to help explain the results.     

Assessing the Determinants of High-Growth Manufacturing Firms in Italy

Few firms grow rapidly, but their contribution to employment growth is often impressive. The main purpose of this paper is to analyse both the external and internal factors that can affect the probability of being a high-growth firm (HGF) in Italy. We found that HGFs are, on average, young firms and are present in different industries, but the role of demand is important to understanding their performance at the sectoral level. Moreover, our findings show that financial constraints and profitability are not associated with the probability of being a HGF. HGFs, on average, are characterised by high productivity, but only when growth is measured in terms of sales. The most original results of this study concern the endogenous determinants of rapid growth, which have yet to be adequately examined in the literature. First, we found that the concentration of ownership is important for HGFs that experienced rapid growth in their sales. Second, the quality of human capital is a strong point for firms experiencing rapid employment growth.     

The path-to-profitability of Internet IPO firms

Extant empirical evidence indicates that the proportion of firms going public prior to achieving profitability has been increasing over time. This phenomenon is largely driven by an increase in the proportion of technology firms going public. Since there is considerable uncertainty regarding the long-term economic viability of these firms at the time of going public, identifying factors that influence their ability to attain key post-IPO milestones such as achieving profitability represents an important area of research. We employ a theoretical framework built around agency and signaling considerations to identify factors that influence the probability and timing of post-IPO profitability of Internet IPO firms. We estimate Cox Proportional Hazards models to test whether factors identified by our theoretical framework significantly impact the probability of post-IPO profitability as a function of time. We find that the probability of post-IPO profitability increases with pre-IPO investor demand and change in ownership at the IPO of the top officers and directors. On the other hand, the probability of post-IPO profitability decreases with the venture capital participation, proportion of outsiders on the board, and pre-market valuation uncertainty.     

国外金融发展影响收入不平等研究综述

金融发展对经济增长的积极推动作用已得到学术界的广泛认可,国外的大量研究进一步指出．金融发展通过实物资本投资、人力资本投资两大主要渠道对社会收入不平等产生影响。对文献的系统梳理和归纳将对促进我国经济增长及缓解收入差距提供理论依据,也对推动国内研究起到积极作用。     

Financial Attitudes in Family Firms: The Moderating Role of Family Commitment

This study investigates how family commitment moderates whether and how financial knowledge, positive experience with debt suppliers, and economic goal orientation affect owner–managers' attitudes toward debt financing in family firms. Using a sample of 280 German family firms, we find significant relationships between both financial knowledge and positive experience with debt suppliers and owner–managers' financial attitudes toward debt. Our findings show that family commitment moderates these relationships such that high family commitment increases the impact of prior experience with debt suppliers, though the effect of economic goal orientation is lowered and reversed. Overall, we contribute to research on financial decision making, capital structure, and social capital in family firms.     

Growing profitable or growing from profits: Putting the horse in front of the cart?

Firm growth is almost universally portrayed as a good thing, and is commonly used as a measure of success. Applying resource-based reasoning, we argue that growth is often not a sign of sound development. Specifically, we hypothesize that firms which grow without first securing high levels of profitability tend to be less successful in subsequent periods compared to firms that first secure high profitability at low growth. Empirical tests using two large, longitudinal data sets confirm that the profitable low growth firms are more likely to reach the desirable state of high growth and high profitability. In addition, they have a decreased risk of ending up performing poorly on both performance dimensions compared with firms starting from a high growth, low-profitability configuration. The results suggest that academics, managers, investors and policy-makers may benefit by adopting a more nuanced view of firm growth that explicitly incorporates its intricate relationship with profitability.     

The impact of managerial ability on crisis-period corporate investment

In this study, we document a strong positive relation between pre-crisis managerial ability and corporate investment during the crisis period, which remains robust in the presence of a large array of control variables capturing corporate governance attributes, executive compensation incentives and CEO characteristics. This relationship was prevalent only among firms with CEOs that had general managerial skills, rather than firm-specific skills. Our results also show that the positive relationship between managerial ability and corporate investment was supported by the capacity of such firms to secure greater financing and be less vulnerable to financial constraints during the crisis. Finally, we find that, on average, the stock market evaluates crisis-period investments positively, yet this effect is evident solely among firms characterized by high pre-crisis managerial ability. Overall, the results are consistent with the view that high managerial ability helps to mitigate underinvestment problems during a crisis which in turn increases firm value.     

Access to Financing as a Barrier to Trade: Evidence From Mauritius

Access to credit is essential for the development and growth of firms. For a small open economy like Mauritius, the ability of firms to enter export markets is essential for their growth and development, given that the size of the local market is quite limited. To increase sales and profitability, firms have to export. However, there are several costs that are involved when firms enter an export market. In many cases, finance becomes an essential factor that influences firms’ ability to export. These authors investigate whether the main constraint that firms in Mauritius face is access to finance and try to understand how firms overcome financial barriers. Given the limitations of existing methods to estimate financing constraints directly from firm-level accounting data, the results based on survey data are an important contribution in improving understanding of firms’ financing obstacles to exporting and how they overcome these barriers.     

What does (not) characterize persistent corporate high-growth?

Theoretical and empirical studies of firm–industry dynamics have extensively focused on the process of growth. Theory predicts innovation, efficiency, profitability and financial status as the central channels through which firms can possibly achieve outstanding growth performance. The question is whether such high-growth performance is sustained over time and, if so, what are the factors enabling persistent high-growth patterns. Exploiting panels of Italian, Spanish, French and UK firms, we relate high growth, persistent high growth and other growth patterns to measures of efficiency, innovativeness, profitability and financial conditions. We find that high-growth firms are characterized by higher productivity and leverage, and that persistent high-growth firms do not systematically differ from other high-growth firms in none of the considered economic and financial dimensions. The findings are robust across countries, manufacturing and services.     

Industry competition and firm human capital

This paper argues that objective and subjective human capital may have substantial impact upon organizational performance in a competitive context. Objective human capital pertains to such features as education and experience, whereas subjective human capital relates to personality characteristics. The argument is illustrated by presenting the results of two empirical studies: (1) a cross-section 1990–1991 analysis of about 50 incumbents in the Flemish furniture industry-concentrating on the impact of subjective human capital, particularly the Chief Executive Officer's (CEO's) locus-of-control personality, on financial performance; and (2) a longitudinal 1970–1992 analysis of a cohort of 100 entrants into the Dutch audit industry-focusing on the influence of objective human capital, particularly education and experience, on exit by merger and acquisition (M&A) or diaspora. Both studies support the claim that objective and subjective human capital matters: for example, Flemish furniture firms headed by a CEO with an internal locus-of-control trait reach higher levels of financial performance, and Dutch audit firms with a high proportion of personnel with business experience are more likely to exit the industry over the years as a result of diaspora. Finally, the data of the Flemish furniture and Dutch audit industries are re-analyzed so as to compare the impact of human capital variables on small-firm performance in both industries. This re-analysis reveals that in both industries the impact of human capital variables is more pronounced in large firms compared to small businesses.     

人力资本跨国流动与中国经济增长——基于外商直接投资视角的研究

跨国人力资本作为外商直接投资(FDI)技术外溢重要载体的观点已被众多文献所探讨,但其对东道国经济增长的作用很少被详细的研究过。本文首先通过一般均衡模型描述了多样化的跨国人力资本和有形资产对东道国经济增长的作用。为了检验理论模型关于经济变量间关系的预测,采用中国1992-2007年29个地区的面板数据考察跨国人力资本流动对于我国经济增长的作用。将跨国人力资本变量引入传统的经济增长回归模型中,并运用SYS-GMM计量方法测算它对经济增长的效应。结果表明,基于FDI的跨国人力资本流动与经济增长显著正相关,在控制其他因素如人口和制度变量后,这一结果仍然稳健有效。     

Human capital and structural upheaval: A study of manufacturing firms in the west bank

Firms in various worldwide locations are repeatedly subjected to radical political, economic, and social upheavals, including changes in administrative governance, new economic paradigms, natural disasters, and warfare. Perhaps because of the difficulty of conducting research in these environments, little is known regarding the unique requirements of entrepreneurs and their business organizations in such troubled locations. Reliable research and information is necessary in order to design and assess methods of providing institutional support both during, and after, such turmoil.Based on data collected from field interviews over a six-month period, this article examines the characteristics of the owners of 64 small manufacturing businesses that have undergone or were experiencing radical political and economic upheaval in the West Bank town of Ramallah in the Palestinian Territories. The objective of the study is to examine characteristics that influence and assist an entrepreneur's resource allocation decision-making processes. This was done by comparatively assessing the effects on profitability of both firm and individual assets in a highly constrained rapidly changing environment. Understanding this allocation process will lead to more effective targeted assistance in regions experiencing or exiting environmental transitions and upheavals.Human capital theory is utilized in this study as a framework for understanding the comparative response of owners to reallocate resources under the stressful environment of the pre- and post-intifada West Bank territories. While human capital has been well studied in literature examining resource allocation in “typical” competitive environments, our understanding of the influence of human capital in transitional environments is quite limited.This study provides some useful, and perhaps surprising results, from both theoretical and practical perspectives. Owner's human capital (coded from formal education) was found to impact profitability only with the micro firms studied (those with three or fewer employees), however, it is possible that this finding reflects dilution of human capital in comparatively larger small and medium-sized enterprises (SMEs). One interesting departure from similar studies is that experience was not found to affect the profitability of the firm. Plant capital, on the other hand, was found to be associated with the profitability of only larger SMEs, controlling for business age and experience of the owner. This finding is significant because, presently, institutions such as the World Bank, NGOs and national development agencies focus their efforts primarily on providing credit to small businesses, whereas training and education currently are somewhat out of favor.A model is proposed in this study comparing resource requirements according to both the size and the productivity/technological level of the firm. The object is to explain the reduced importance of human capital and experience in environments of radical transition, specifically the arbitrary nature and lack of predictability of transitional governance, and the increased importance of financial capital only with large SMEs. It is argued that skills acquired in functional expertise do not necessarily prepare an entrepreneur for the abrupt environmental transformations characteristic of tumultuous political events. This research suggests that owners are in a better position to maximize their cognitive skills in decision making within smaller organizations. However, these skills are naturally diffused and so less effective at influencing the outcomes of somewhat larger organizations. Larger SMEs are necessarily more capital intensive and more bureaucratic, and so the cumulative human capital at the organizational level may be more important to allocative efficiency than the human capital of the individual firm owner. Further, larger SMEs require organizational expertise that may not be captured in the individual level characteristics of entrepreneurs.This research suggests that efforts to support such environments should carefully consider the size of the firms in question before designing and implementing programs of assistance, differentiating microenterprises from small businesses. In particular, the findings of this study suggest that smaller firms experiencing rapid environmental upheaval will benefit most from formal education, training and advice. Larger firms, in contrast, appear to benefit most from loans providing traditional capital support, and from advice across the entire firm's human capital base, particularly regarding organizational management and delegation skills.     

Capital expenditure decision making in small firms

A number of studies have been conducted to determine the extent to which large firms utilize sophisticated techniques in capital expenditure decision making. This research effort focuses on financial decision making procedures of small firms, exploring the techniques utilized to evaluate investment opportunities, methods employed to adjust for risk, purposes of expenditures and concern for profitability, and the source and cost of funds. In light of the recent debate on the capital shortage issue, small firms were also asked what type of tax reform they deemed most desirable to stimulate capital investments.