Cash holdings and business group membership

This study examines the cash policies of business group members (i.e., affiliates). Using a panel dataset of private Belgian affiliates and comparable non-affiliated firms, the empirical results show that business group affiliates hold significantly smaller amounts of cash as compared to non-affiliated firms. This finding is consistent with the notion that affiliates can afford to keep lower cash reserves because these firms can access the internal capital market of the group. The analysis also combines affiliate level and group level data to evaluate cash drivers and shows that groups in financial distress reduce cash holdings in affiliates. However, affiliates that are more important for the group's reputation and operations maintain cash levels comparable to affiliates belonging to financially healthy groups.     

Cash holdings and corporate governance in family-controlled firms

This study examines the association between corporate governance and cash policy within family-controlled firms. Family businesses are complex, because, in addition to dealing with common business requirements and opportunities, they must consider the needs and desires of the family owners. The results of this study show that the impact of corporate governance, with its separation of control rights and cash flow rights, director-ownership-in-pledge ratio and proportion of independent directors on cash policy, differs between family-controlled and nonfamily-controlled firms. Separation of seat control rights and cash flow rights, as well as chair duality, significantly affects the cash policy within different levels of cash holdings in firms.     

Governance mechanisms, investment opportunity set and SMEs cash holdings

This study analyses the effect of firm characteristics and governance mechanisms on cash holdings for a sample of UK SMEs. The results show that UK SMEs with greater cash flow volatility and institutional investors hold more cash; whereas levered and dividend paying SMEs with non-executive ownership hold less cash. We also find that ownership structure is significant only in explaining the cash holdings for firms with high growth investment opportunities, and leverage is only significant in explaining the cash held by firms with low growth investment opportunities. Our findings suggest that internal governance mechanisms are more effective for SMEs with high growth investment opportunities, while external governance mechanisms, such as capital market monitoring, are more effective for firms with low growth investment opportunities.     

On the adjustment speed of SMEs to their optimal capital structure

The aim of this paper is to analyse the speed of adjustment of small and medium-sized enterprises (SMEs) to the target leverage. By applying a system GMM technique to Spanish panel data collected during the period 1995?C2005, we estimate a partial adjustment model in which both target leverage and speed of adjustment are simultaneously endogenized. We provide empirical evidence on the determinants of target leverage and the speed of adjustment. More specifically, the rate of financial flexibility, growth opportunities and size are positively related to the speed of adjustment, whereas the distance to the optimal ratio of debt shows a negative impact. Our findings demonstrate that, in terms of sample mean, a high percentage of Spanish SMEs adjust rationally to their target. Additionally, the SMEs analysed appeared to be over-levered and fairly motivated to adjust (annual adjustment speed: 26%).     

Cash holdings of minority family businesses in Indonesia

Market-dominant minorities (MDM) is a phenomenon widespread in emerging countries. Drawing on the socioemotional wealth perspective, we investigate the cash holdings of minority family businesses owned by the Chinese diaspora, as MDM in Indonesia. Our findings suggest that they hold a relatively high level of cash. However, there is heterogeneity among these MDM firms, whereby those with family management hold a lower level of cash. Furthermore, by analyzing the effect of the 2016 Jakarta protests, we find that MDM businesses may change their cash policies after an ethnic conflict. This study advances our understanding of MDM family firms.     

Cash holdings and SME performance in Europe: the role of firm-specific and macroeconomic moderators

Small Business Economics - For the first time, this paper examines the way in which cash holdings affect firm operating performance in a wide sample of European small and medium-sized enterprises...     

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.

Sanctions against Iran,political connections and speed of adjustment

This study examines the effect of intensifying economic sanctions against Iran on speed of adjustment (SOA) in firms listed on Tehran Stock Exchange during 2001–2018. We find evidence that firms adjust their leverage toward the target at a lower speed in high-intensity sanctions than low-intensity sanctions. Moreover, we indicate that the negative impact of the intensification of sanctions on SOA is stronger for politically connected firms than other firms. Our results are robust to an alternative set of leverage determinants, two alternative definitions for sanctions intensity, an alternative measure for political connections, and an alternative two-step process for hypotheses testing.     

Constraints,internationalization and growth: A cross-country analysis of European SMEs

Small and medium sized enterprises (SMEs) are known to face barriers which limit their ability to grow. We build on resource dependency theory and the resource-based view to investigate how SMEs are able to achieve venture growth in the face of these constraints by adopting internationalization and inter-firm collaboration strategies. Based on a large sample of European SMEs, our research demonstrates the importance of distinguishing between specific dimensions of internationalization and inter-firm collaborations, in particular between exporting and importing, and between formal and informal collaborations – as well as context-specificity of these strategies with respect to the types of constraints SMEs face.     

Preference Ordering Cash,Near Cash,and Electronic Cash

ABSTRACT

This research investigates the impact of sociocultural determinants on people’s perceptions and usage of smart systems in the United Arab Emirates (UAE). This research used the Theory of reasoned action, Unified theory of acceptance and use of technology (UTAUT) and Frambach and Schillewaert’s framework. These theories which focus on the determinants of technology acceptance behavior of users have been widely used in contemporary technology acceptance research. Data were collected from the UAE Ministries of Foreign Affairs, Health, and Economy using structured questionnaires. A total of 357 responses were analyzed using multivariate statistical techniques such as regression analysis and factor analysis. Multiple regression analysis helped to determine the direction of relationships between the constructs representing users’ sociocultural orientation, attitude toward smart systems and acceptable behavior. Factor analysis served to identify the underlying dimensions of the above constructs. The major finding of this research is that cultural values and peers’ influence significantly affect users’ perceptions and applications of technological innovations. Furthermore, the study reveals that users’ age and gender wield critical moderating effects on the relationship between cultural values and attitude toward smart systems. These findings have important implications for acceptance and implementation of smart systems in the UAE which are highlighted in this paper. This paper also identifies the limits of this research and explores the venues of further research in this field.     

SMEs and regional economic growth in Brazil

This paper examines the relationship between the small and medium-sized enterprise (SME) sector and economic growth for an annual panel of Brazilian states for the period 1985–2004. We investigate the importance of the relative size of the SME sector measured by the share of SME employment in total formal employment and the level of human capital in SMEs measured by the average years of schooling of SME employees. The empirical results indicate that the relative importance of SMEs is negatively correlated with economic growth, a result that is consistent with previous studies examining developing countries. In addition, our results show that the human capital embodied in SMEs may be more important for economic growth than the relative size of the SME sector.     

Long-term debt maturity and financing constraints of SMEs during the Global Financial Crisis

We use the recent financial crisis to investigate financing constraints of private small and medium-sized enterprises (SMEs) in Belgium. We hypothesize that SMEs with a large proportion of long-term debt maturing at the start of the crisis had difficulties to renew their loans due to the negative credit supply shock, and hence could invest less. We find a substantial variation in the maturity structure of long-term debt. Firms which at the start of the crisis had a larger part of their long-term debt maturing within the next year experienced a significantly larger drop in investments in 2009. This effect is driven by firms which are ex ante more likely to be financially constrained. Consistent with a causal effect of a credit supply shock to corporate investments, we find no effect in “placebo” periods without a negative credit supply shock.     

New firm growth and bank financing

This paper examines the extent to which Lucas' ideas on human capital and Jovanovic' theorising on learning can provide further insights into the development of small firms. It focuses exclusively upon newly established independent firms. Our evidence from two surveys is that bank lending to new firms is unrelated to many of the personal characteristics of founders which have been argued by other researchers to relate to small firm performance. Instead lending appears to be more related to whether or not the founder can or chooses to use personal savings, and the legal status of the business.     

Proactiveness,legitimation via ISO certification and the growth of SMEs in China

According to the literature on entrepreneurial orientation (EO), proactive firms are more likely to achieve first-mover advantage and higher performance. The neoinstitutionalism, however, suggests that enterprises with more legitimacy will acquire more growth opportunities. Usually, the first mover might face more legitimacy obstacles. To date, there has been little research on how proactive firms cope with legitimacy constraints and achieve firm growth. Integrating the legitimacy perspective and the EO literature, this research examines the roles of ISO certification as a strategy for seeking legitimacy of small and medium-sized enterprises (SMEs) in emerging economies, and the relationship between proactiveness and firm performance. In particular, it hypothesizes that ISO certification has a mediating effect on the relationship between proactiveness and firm growth. We test the hypothesis using a sample of 632 firms collected from a nationwide survey on SMEs conducted by the Chinese SME Association. The results reveal that ISO certification partially mediates the relationship between proactiveness and firm growth, suggesting that proactive firms tend to use legitimation via ISO certification to enhance firm growth. Our paper contributes to the literature by shedding light on the important relationship between seeking legitimacy, entrepreneurial orientation and firm growth in SMEs in an emerging economy.     

Post-entry internationalization speed of SMEs: The role of relational mechanisms and foreign market knowledge

Prior research shows that small and medium-sized enterprises (SMEs) can utilize domestic networks with internationally experienced partners to accelerate their internationalization process. Yet, there is a lack of clarity and limited empirical evidence regarding the role of relational mechanisms within these networks in driving post-entry internationalization speed (PIS) of SMEs. To address this gap, this study examines the relational mechanisms-PIS relationship by drawing insights from the relational view to argue that foreign market knowledge mediates the relationship between relational mechanisms and PIS. The hypothesized study model is tested using a structural equation modelling (SEM) technique on a sample of 394 UK based manufacturing SMEs. Our results show that foreign market knowledge acquisition from domestic networks fully mediates the relationship between relational mechanisms and PIS. Additionally, the linkage between foreign market knowledge acquisition and PIS is moderated by domestic environmental hostility, such that the relationship is strengthened when domestic environmental hostility increases. We discuss the contributions and implications of our results and suggest opportunities for future research.     

The influence of international networks on internationalization speed and performance: A study of Czech SMEs

Drawing on social capital theory and the international entrepreneurship literature, we develop hypotheses relating the structural, cognitive and relational aspects of the international network of SME CEOs to two internationalization outcomes – speed and performance. The study is based on a sample of 155 Czech SMEs covering a broad range of manufacturing industries. Our findings indicate that firms sharing a common language with their international ties are able to internationalize faster than firms that do not share a common language. Moreover, we observe that geographically diverse networks contribute to superior performance. Extensive reliance on personal contacts hinders the performance of the first international venture.     

The effect of geographic scope on growth and growth variability of SMEs

The impact of international expansion on the success of small and medium enterprises (SME) has been extensively studied, particularly with respect to the performance implications of expansion into foreign markets. Yet, the literature is still unclear on the consequences of the SME's geographic scope (i.e., the number of countries a firm operates in). Drawing on the contemporary internalization theory, we build a theoretical framework suggesting that SMEs’ geographic scope positively impacts firm growth rate, yet makes it less reliable, i.e., a positive effect on both the mean and the variability of growth. We also suggest that this relationship is highly context-dependent. The positive benefits of the increasing scope materialize only when the firms can manage the rising complexity of operational governance through leveraging the managerial international competencies (obtained, e.g., through international education and international experience) and constraining the geographic expansion to their home region. The framework is empirically tested on data from Swiss SMEs engaged in international operations, employing the multiplicative heteroscedasticity regression model specification with endogenously modeled scope.     

Trade shocks,product mix adjustment and productivity growth in Italian manufacturing

In this paper, we use firm-level data on the universe of Italian manufacturing multi-product exporters to test whether demand shocks in export markets lead multi-product exporters to increase their productivity. The main mechanism behind the documented productivity gains is the reallocation of resources across products within firms (American Economic Review, 104, 2014 and 495; National Bureau of Economic Research Working Paper Series No. 22433, 2016). Intuitively, the increased demand stemming from foreign markets will induce firms to adjust their product mix by moving inputs from low to high productive/profitable uses. We find that these productivity gains are significant and can explain between 1/10 and 1/2 of aggregate productivity growth in the manufacturing sector.     

Venture capital financing and the growth of startup firms

This study examines the association between the presence of venture capital (VC) and the employee growth of startups. Grounded in signaling theory, it investigates the impact, if any, of VC financing events upon the growth of these companies and whether the amount of funding affects the intensity of the signal. It further explores whether VC leads to growth or, alternatively, whether growth signals the need for VC. Finally, it documents the relationship between growth in startup financial valuation and changes in the number of employees over successive rounds of financing.