The influence of family ownership on SME performance: evidence from public firms in Taiwan

The relationship between family ownership and firm performance has gained increased attention in the business strategy and financial economics literature. Most existing studies use large companies as the research sample; studies that explicitly investigate the influence of family ownership on the performance of small- and medium-sized enterprises (SMEs) remain sparse. This study raises this issue explicitly by investigating the influence of founding-family ownership on the return on assets and Tobin’s q of 341 public SMEs in Taiwan, during the period of 2002–2006. It emerges from the data that family ownership is prevalent and substantial in Taiwan, representing half of the public SMEs and accounting for more than 11 percent of their outstanding equity. It was found that the influence of family ownership on SME performance is positive and significant. Overall, the results suggest that family ownership is an effective organizational structure for SMEs in Taiwan.     

Industry Effects on the Determinants of Unquoted SMEs' Capital Structure

This paper reports a study of 3500 unquoted, UK small and medium sized enterprises (SMEs). The objectives of the research were to test various hypotheses concerning the determinants of SME capital structure and to establish whether and how the relationship of these determinants to long- and short-term debt varied between industries. Long-term debt was found to be related positively to asset structure and company size and negatively to age; short-term debt was related negatively to profitability, asset structure, size and age and positively to growth. Significant variation across industries was found in most of the explanatory variables. The effect of growth on short-term debt, however, was consistent across industries whilst profitability had no effect on long-term borrowing in any industry.     

Financial intermediaries,ownership structure and the provision of venture capital to SMEs: evidence from Japan

This paper examines how the provision of venture capital to small- and medium-sized businesses (SMEs) is influenced by the ownership structure of the venture capital provider. We introduce a new and unique dataset from the Japanese venture capital market, comprising data on investment and venture capital activities of 127 Japanese venture capital funds. The data allow us to provide a direct comparison of the behaviour of individual owner-manager venture capitalists versus financial intermediation (e.g., bank’s venture capital divisions). The data indicate owner-manager venture capitalists (financial disintermediation) give rise to much smaller portfolios of SMEs and more advice to entrepreneurs. Across the scope of different financial intermediation structures, including banks, life insurance companies, securities firms, corporations and government bodies, there are further differences in the provision of governance and value-added advice provided to SMEs. Also, the data indicate US-affiliated funds in Japan are more likely to have smaller portfolios and tend to provide more advice to SMEs.

Capital structure of SMEs in Spanish regions

This article examines whether the capital structure of small and medium-sized enterprises (SMEs) and its firm-factor determinants are different across regions belonging to a single country. This subject is relatively innovative in capital structure research, since the majority of the studies carried out in a single country have neglected to take into account the region in which firms operate to explain leverage. To this end, we study whether the capital structure and its firm-factor determinants—size, asset structure, profit, growth, and age—differ depending on the region in which the SMEs are located. For the empirical analysis, panel data methods are applied to a sample of firms from all regions of Spain for the period 2004–2007. Our results not only suggest that there are regional differences in the SMEs capital structure but also confirm that the impact of firm-factor determinants on leverage differs across regions in terms of signs, magnitudes and significance levels.     

Are the determinants of capital structure country or firm specific?

In this paper we investigate the capital structure determinants of Greek, French, Italian, and Portuguese small and medium-sized enterprises (SMEs). We compare the capital structures of SMEs across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. The results show that SMEs in these countries determine their capital structure in similar ways. We attribute these similarities to the country institutional and financial characteristics and the commonality of their civil law systems. However, structural differences arise due to firm specific effects. We find that size is positively related to leverage while the relationship between leverage and asset structure, profitability and risk is negative. Growth is not a statistically significant determinant of leverage for any of the four countries. Our main conclusion is that firm-specific rather than country facts explain differences in capital structure choices of SMEs.     

我国上市公司多元化经营的决定因素研究

This paper empirically studies the determinants of diversification of Chinese listed companies from the perspectives of motivation and conditions. Results show that the traditionally believed motivations of economic rationality, organizational rationality and individual rationality have all exerted influences upon the choice of diversification models. By comparison, the choice of diversification mode for Chinese listed firms is largely based on organizational rationality motivation (to reduce company risks) and individual rationality motivation (in the self-serving interests of the top management). Meanwhile, such conditioning factors as company size, ownership structure, age of being listed, and the industry in which a company is all have significant effects on the choice and degree of diversification for Chinese listed firms. Translated and revised from Guanli shijie 맜理世界(Management World), 2006, (5): 128–135     

Collateral,relationship lending and family firms

Prior research suggested that relationship lending could play a role in solving asymmetric information problems between borrower and lender. Other studies suggest a relationship between family ownership and the shareholder–bondholder agency conflict. The present paper investigates the impact of relationship characteristics, family ownership and their interaction effects upon the use of collateral in SME lending. We examine the determinants of collateral as well as the determinants of the choice between business and personal collateral using decision tree analysis. The results reveal that relationship characteristics have a significant influence, but not always in the direction as expected. Moreover, they do not seem to be the primary determinants in our classification models. The most important determinants in both classification models seem to be the loan amount, total assets and the family versus non-family firm distinction. In addition, we differentiate between line-of-credit and non-line-of-credit loans and find significant differences between these decision trees.     

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.     

Ownership and technical efficiency in Malaysia's automotive industry: A stochastic frontier production function analysis

This article examines the direct effect of the extent of foreign ownership on technical efficiency in Malaysia's automotive industry by applying a stochastic frontier production function analysis to micro-panel data over the years 2000–2004. Technical efficiency in the overall automotive industry is positively related to the degree of vertical integration, the size of establishments in the respective sub-sectors, a higher quality of the work force, and a higher foreign ownership share in the establishment combined with higher net-import intensity. Foreign ownership and net-export intensity are not significant determinants of technical efficiency inthe parts sub-sector. Although majority foreign ownership is not allowed in the assembly sub-sector, this sub-sector is large, with asmall number of establishments generating scale economies in the automotive industry. The determinants of technical efficiency in the parts sub-sector show that foreign ownership per se does not enhance technical efficiency since other determinants like the degree of vertical integration and the size of establishments are significant determinants of technical efficiency.     

The impact of firm and industry characteristics on small firms’ capital structure

We study the impact of firm and industry characteristics on small firms’ capital structure, employing a proprietary database containing financial statements of Dutch small and medium-sized enterprises (SMEs) from 2003 to 2005. The firm characteristics suggest that the capital structure decision is consistent with the pecking-order theory: Dutch SMEs use profits to reduce their debt level, and growing firms increase their debt position since they need more funds. We further document that profits reduce in particular short-term debt, whereas growth increases long-term debt. We also find that inter- and intra-industry effects are important in explaining small firms’ capital structure. Industries exhibit different average debt levels, which is in line with the trade-off theory. Furthermore, there is substantial intra-industry heterogeneity, showing that the degree of industry competition, the degree of agency conflicts, and the heterogeneity in employed technology are also important drivers of capital structure.     

Sectoral Analysis of Corporate Capital Structure Choice–Emerging Market Evidence from Sri Lanka

ABSTRACT

This paper empirically investigates the overall corporate capital structure of the Sri Lankan-listed companies, the determinants in general and the inter-industry differences in particular. The impact of ten determinants has been analyzed cross-sectionally, both for the market as a whole and for each individual industry, to observe any sectoral differences. Though the long-term debt utilization is relatively low in the financial structure of Sri Lankan firms, the variables of capital structure choice are not significantly different from those located in developed markets signaling a positive move towards a market-driven economy. Yet, variations could be seen across industry classes to some extent in terms of their capital structure decisions, confirming the evidences of literature.     

Where Do Financial Constraints Originate from? An Empirical Analysis of Adverse Selection and Moral Hazard in Capital Markets

Despite the voluminous and growing literature on financial constraints, the origins of the constraints are hardly ever empirically analyzed. This paper offers such an analysis. We study, in particular, the empirical prevalence of adverse selection and moral hazard in capital markets using a unique survey data on Finnish small and medium-sized enterprises (SMEs). The survey data suggest that adverse selection is empirically more prevalent than moral hazard in the capital markets that the SMEs face. We also find that of the variables indicating the presence of adverse selection and moral hazard, the former has more explanatory power in regressions modeling the availability of external finance to the SMEs than the latter. Finally, we document that our proxies for adverse selection and moral hazard are inversely related to the age of firms, just like Peter Diamond’s (1989) model predicts.     

Testing trade-off and pecking order theories financing SMEs

This paper explores two of the most important theories behind financial policy in Small- and Medium-Sized Enterprises (SMEs), namely, the pecking order and the trade-off theories. Panel data methodology is used to test empirical hypotheses on a sample of 3,569 Spanish SMEs over a 10-year period dating from 1995 to 2004. Results suggest that both theoretical models help to explain SME capital structure. However, despite finding clear evidence that SMEs follow a funding source hierarchy (pecking order model), our results reveal that greater trust is placed in SMEs that aim to reach target or optimum leverage (trade-off model). This remains true even when SMEs take a long time to reach this level, due to the high transaction costs they have to face. Non-debt tax shields (NDTS), growth opportunities and internal resources all seem to play an important role in determining SME capital structure. Both size and age are also found to be significant factors. Moreover, the empirical evidence obtained confirms that SMEs clearly behave differently to large firms where financing is concerned.

Top management team characteristics,R&;D investment and capital structure in the IT industry

This paper is based on agency theory, resource-based and upper-echelons perspectives to examine the relationship between R&D investment and capital structure and the moderating effects of top management team (TMT) characteristics on the financing decisions of R&D investment in small and medium enterprises (SMEs). Using data for SMEs in Taiwan’s IT industry, we find that (1) SMEs involved in R&D activities tend to have lower debt levels and (2) TMT characteristics exert considerable influence on the R&D investment-financial leverage relationship in SMEs. One important implication of the empirical evidence is that for SMEs trying to compete on the basis of innovation, the TMT characteristics significantly influence financing decisions. As innovative activities increase, the selection and development of top executives, who are responsible for choosing an optimal capital structure that could keep financial costs low while providing sufficient financial resources for maintaining a continuous, uninterrupted rate of R&D, is crucial for SMEs.     

Empirical Analysis of Business Growth Factors Using Swedish Data

Empirical research conducted on the U.S., German, Australian, and Scottish economies has shown that age, size, location, legal form, and industry are related to business growth. Much of this research has focused on manufacturing firms, thus providing little information about the effect of industrial sector differences on these factors. We seek to both confirm that small independent firms demonstrate the greatest growth rates and to explore the effects of the industrial sector on this conclusion.
This article uses Swedish data to replicate previous research while using a different definition of business to enhance the study of effects from industry, international versus domestic businesses, and domestic versus foreign ownership. Results show that business age, beginning size, ownership form, industrial sector, and legal form are the most important factors related to growth. Although business growth differs among industrial sectors, youth, ownership independence, and small size are major factors that underlie growth across all industries.     

The Small Business Capital Market Behavior in Athens Stock Exchange

Financing small and medium enterprises (SMEs), especially business investments and growth, is a composite and particular complicated affair in the Greek entrepreneurial reality. This paper examines the significance of secondary capital markets, as an alternative source of financing small-medium enterprises’ new entrepreneurial plans. Cointegration technique is applied to test the relationship between the secondary capital market and the dominant sectors in Athens Stock Exchange (ASE). Causality tests are also used to provide evidence on the existence of interdependence between the cointegrated series. The results indicate that there is significant uni-directional causality between primary and secondary capital market in Greece, enhancing us to suggest valuable policy implications.      

Gender differences in business performance: evidence from the Characteristics of Business Owners survey

This paper compares the technical efficiency of small and medium-sized enterprises (SMEs) with that of large firms and studies the factors influencing technical efficiency for Taiwan’s electronics industry. Unlike conventional studies, we use two alternative approaches to control for the influence of size effect. One is the two-stage switching regression to correct for endogenous size effect on technical efficiency and, the other is, a metafrontier production function for firms in different groups. The main results are as follows. First, the average technical efficiency for large firms is higher than that of SMEs, without considering the size effect, and lower when considering the endogenous choice on firm size. This study cannot, therefore, conclude that there is a negative size–technical efficiency relationship. It however, sheds light on the importance of size effect on the size–technical efficiency nexus. Second, the estimates on the determinants of technical efficiency show that being a subcontractor has a statistically significant positive influence on SMEs’ technical efficiency, but the effect decreases with firm size.

The Dynamics of Listed SMEs in China

We examine the dynamics of Chinese listed SMEs with respect to their post-market viability and growth after going public. The Kaplan–Meier estimation shows that SMEs are more likely to transition to a non-viable state than large firms. Further examination using the Cox model and the random effects model shows that SME dynamics are shaped by heterogeneous firm and industry characteristics, as well as the underlying financial and institutional environments. SME viability is distinguished by its ability to grow through learning along with age, aided by lower business risk, more focused business, easier access to equity finance, and less exposure to competition in remote regions. SME growth is constrained by a dispersed ownership structure, insufficient infrastructure to protect firms which are active in R&D, and the limited financing role of equity markets. The study also reveals that government initiatives in support of strategic development in the service industries and in the coastal regions are of importance in spurring SME growth.     

FDI、工业产出的所有制结构变化与长江三角洲地区工业发展——基于FEDER非均衡框架的分析

本文扩展了FEDER模型,在一个三部门的非均衡框架中对不同所有制工业的外资产出效应进行理论研究,并利用1999-2009年长江三角洲3省市的有关数据进行了检验。本文认为:除了劳动和资本等要素投入以外,不同所有制工业产出结构变化对工业产出增长有不同的拉动作用;外资的行业和贸易方式分布差异、区域的市场化程度等是不同地区、不同所有制企业产出的外资产出弹性差异的主要原因。     

Complementarity between Relationship Lending and Collateral in SME Access to Bank Credit: Evidence from Ethiopia

ABSTRACT

Despite their contribution to job creation, small and medium enterprises (SMEs) are financially constrained. Lenders view SMEs as high risk borrowers and hence demand collateral, but lack of collateral inhibits SMEs access to credit. Relationship lending is believed to lessen collateral requirement and increase SMEs access to credit. However, recent studies question substitutability of relationship lending and collateral. The present study adds to the debate by drawing on the survey of 102 randomly selected manufacturing SMEs in Ethiopia. Our binary logistic regression results suggest that banks in Ethiopia are cautious in extending credit to SMEs, evidenced by simultaneous usage of relationships, collateral and other criteria, suggesting complementarity between collateral and relationship lending.