A Note on Affordability and the Optimal Share Price

Despite the increase in institutional ownership, decreased trading costs, and increased real personal savings, we find that the average stock price is lower today than it was in the 1920s. In the aggregate, the propensity to split is a function of recent market performance, personal savings, and the desirability of appearing to be a small firm. Our results indicate that, after decades of inflation and the average stock price falling, splitting stocks to return to an "affordable" trading range must be rejected as an explanation. This suggests that other economic forces are behind splits, whether traditional or behavioral in nature.     

Taxation and the Performance of Technology Based Small Firms in the U.K.

This paper analyses a database of U.K. small companies in order to establish the profile of Technology Based Small Firms (TBSFs) in terms of their demography, financial structure and performance, and tax affairs. Following the evaluation of the impact of direct taxation on the high technology small companies, compared to that of their low technology counterparts, the paper briefly discusses the current policy debate about the nature and appropriateness of tax-based incentives for the development of this strategically important scale and type of enterprise.     

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.     

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.