Purpose The study aims to empirically evaluate the effect of internal factors of small and medium enterprises (SMEs) on their financing choices. It also examines the financing practices of listed SMEs in India and finds out whether the financing patterns of listed SMEs follow the established theories of corporate finance. Design/methodology/approach For this study, 113 SMEs listed on National Stock Exchange Emerge Platform are considered for the period from 2014 to 2018. Panel data regression is applied. The control group has been identified by using the propensity score matching approach. Qualitative information has been collected from the bank officials and the promoters of listed SMEs. Findings The study reveals that for meeting financial requirements, listed SMEs initially create current liabilities followed by usage of total reserves. Thereafter, they look for short- and long-term borrowings for further funding options. No significant change is observed in the financing pattern of listed SMEs as compared to their non-listed matched firms. The study suggests that no single theory, including pecking order theory or trade-off theory, could explain the behaviour of SMEs financing completely. Research limitations/implications The financing pattern of SMEs can be of great interest to various stakeholders such as government and lenders. As no significant boost is observed in debt financing post listing, this aspect needs to be evaluated by the stakeholders. Originality/value This study is significantly different from the existing studies, as it attempts to evaluate the impact of listing on overall financing pattern of SMEs in India. This is also one of the very few studies that uses both quantitative and qualitative information to examine the same.
Small and Medium-sized Enterprises (SMEs) play a very significant role in boosting sustainable economic growth and development of any country. The present study examines various firm-specific determinants that have an impact on the financing choice of the listed Indian SMEs. It also studied the financing practices of the listed SMEs in India and tried to find out if their financing pattern follows the established theories of Corporate Finance. The study selected 113 SMEs listed on the NSE Emerge Exchange for the period between 2014 and 2018. To examine the problem, empirical analysis is done with the help of panel data regression. The study finds that for meeting financial requirements of listed SMEs, they prefer current liabilities first, then total reserves, thereafter short-term borrowings and lastly the long-term borrowings. Among the independent variables chosen based on an extensive literature survey, most of them are statistically significant but are depicting lower explanatory power. Hence, it leads to the possibility of some other firm-specific factors or macroeconomic factors being more relevant in deciding the listed firm’s financing choices. The study concludes that no single theory like Pecking Order Theory (POT) or Trade-Off Theory (TOT) can explain the financing behaviour of listed SMEs completely. It contributes to the extant literature on listed SMEs by attempting to examine the impact of listing on the financing patterns of the SMEs.
Modern Monopolies is an interesting narrative about a new business model platform. The book is written with the aim to spread the knowledge about this new model among the entrepreneurs and prepare them to capitalise the enormous opportunities this business model generates. The write-up in the book revolves around platforms as the prime business model in the era of digitalisation. It discusses what platforms are, how they work and why they are important. It also suggests the ideas to make platform business model a successful business venture. The book elaborates the success and failure of platform business model with the help of examples of such businesses active across the world since their inception. The book is jointly written by Alex Moazed and Nicholas L. Johnson. Though it is the first book of both the authors, it is a good treat for the readers. Alex Moazed is the Founder and CEO of Applico. He has the experience of working directly with management and board members of Fortune 500 companies to help them build or buy their own platform businesses. Nicholas L. Johnson is the Head of Platform at Applico, where he oversees the company's research into how platforms work. He works with clients on business model design and bringing pioneering platforms to market. The authors' vast practical exposure helped them to compile a lot of real-world examples which makes the book an interesting read. At the same time, it also makes it easy to understand how the concept of platform business model actually works. Throughout the text, it has been explained how modern monopolies are created and why platforms are reinventing the economy today. The book is broadly divided into two parts: The first half discusses what a platform business model is and the second half expounds how the platform business model work. In Part I, a platform business model has been defined as the one which creates value by facilitating an exchange between two or more persons or group of persons. So, rather than producing things, they simply connect people. Exemplary performances of platform business models described in the book are Google, Snapchat, Tinder, Amazon, Uber among others. This new business model has quietly become a game changer and provides enormous opportunities of growth to its founders. The authors have discussed some frameworks in detail which they use to assist their clients. The book also discusses how platform business is quickly overtaking linear business models. Initially, the authors described the difference between the two models of business with the help of opinions of various experts and examples to support those opinions. Somehow, they settle on the idea that concepts like value chain, economies of scale and linear business models are old now and provide gradual returns/benefits in the business. On the contrary, the effect of platforms is massive and immediate. By quoting the idea of Peter Thiel (PayPal founder and former CEO), it is stated that capitalism and competition are opposite. Today companies which drive the economies ...
Small and medium-sized enterprises (SMEs) are the driving force for the robust socioeconomic growth of a country. The study primarily aims to empirically evaluate the impact of certain firm-specific factors on the financing preferences of the listed SMEs with specific reference to India. It attempts to examine their financing practices and also investigates if they follow the order explained under various theories of finance. The sample consists of 134 listed SMEs on NSE as well as BSE SME exchange. They have been studied for the period from 2014 to 2019. The sample and the time period of the study differentiates it from the existing studies in the domain. It concludes that though majority of the variables included in the model are statistically significant, there is a possibility of influence of other micro-level variables or macro-level economic factors on the financing decisions of the listed SMEs. It is also revealed that for their financial needs, SMEs prefer short-term spontaneous sources, that is, payables and provisions, then accumulated profits followed by short-term borrowings and in last opt for the long-term debt. The study also found that there is no single theory that can completely explain the financing behavior of the listed SMEs. Moreover, it is also observed that no additional benefit is available for SMEs out of listing in India.
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