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  • Finance-seeking behaviour and outcomes for small- and medium-sized enterprises

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    WorthingtonPUB644.pdf (164.9Kb)
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    Accepted Manuscript (AM)
    Author(s)
    Xiang, Dong
    Worthington, Andrew
    Griffith University Author(s)
    Worthington, Andrew C.
    Year published
    2015
    Metadata
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    Abstract
    Purpose – Model finance-seeking behaviour and outcomes by Australian small- and medium-sized enterprises (SMEs) using firm-level panel data. The paper aims to discuss this issue. Design/methodology/approach – Using firm-level three-year panel data for more than 2,000 SMEs from the Business Longitudinal Database compiled by the Australian Bureau of Statistics, the authors estimate separate models for the seeking of finance (debt and/or equity) and the outcomes of finance seeking (successful or unsuccessful). Key explanatory variables include declared business focus (on financial, cost, operational, quality, innovation, and ...
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    Purpose – Model finance-seeking behaviour and outcomes by Australian small- and medium-sized enterprises (SMEs) using firm-level panel data. The paper aims to discuss this issue. Design/methodology/approach – Using firm-level three-year panel data for more than 2,000 SMEs from the Business Longitudinal Database compiled by the Australian Bureau of Statistics, the authors estimate separate models for the seeking of finance (debt and/or equity) and the outcomes of finance seeking (successful or unsuccessful). Key explanatory variables include declared business focus (on financial, cost, operational, quality, innovation, and human resource measures), presence of business plans and other documentation related to successful finance seeking, innovation, indicators for family and foreign-owned businesses, and profitability. Control variables include sales, the number of employees, length of operations, export and import activity, government financial assistance, and industry classification. Findings – Business objectives together with a large number of firm-level characteristics, including firm age, size, industry and sales, profits, growth and exports, significantly affect both finance-seeking behaviour and outcomes. The authors find evidence that the pecking-order and agency cost theories of capital structure at least partly explain the financial behaviour of Australian SMEs. Research limitations/implications – Several of the responses in the underlying survey data are qualitative so the authors are unable to assess how the strength of these relationships varies by the levels of sales and profitability. Practical implications – The findings show that business objectives significantly affect SME finance-seeking decisions and outcomes. SMEs that focus on profitability or growth have a strong willingness to seek additional finance; in comparison, SMEs that focus on the quality of their products or services are less likely to apply for additional finance. As only half of the SMEs in the sample considered profitability or growth to be a major business focus, core business objectives greatly affect SME financing decisions. Further, pecking-order theory not trade-off theory better explains the financial behaviour of SMEs, yielding evidence that SMEs continue to face financial constraints when pursuing growth. Some evidence also of agency cost theory in the positive effects of family ownership on debt seeking. Originality/value – One of very few studies to examine finance seeking by SMEs, especially in Australia. Further, only study known to include declared business strategy, presence of business plans and other finance-related documentation and innovation in addition to the usual focus on growth and profitability to explain financing behaviour. Very large panel of longitudinal data used to explain financial decision making over time.
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    Journal Title
    International Journal of Managerial Finance
    Volume
    11
    Issue
    4
    DOI
    https://doi.org/10.1108/IJMF-01-2013-0005
    Copyright Statement
    © 2015 Emerald. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
    Subject
    Accounting, auditing and accountability
    Banking, finance and investment
    Banking, finance and investment not elsewhere classified
    Publication URI
    http://hdl.handle.net/10072/101599
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    • Journal articles

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