Debt policy and performance of SMEs

Abor, Joshua Yindenaba

doi:10.1108/15265940710777315

Cited by 147 publications

(65 citation statements)

References 32 publications

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“…9, No. 6;2013 71 result is consistent with Pecking Order Theory and previous studies and (Titman & Wessels, 1988) and (Abor, 2007).…”

Section: Profitabilitysupporting

confidence: 81%

“…Comparatively, some previous studies define size in a number of ways including number of employees (Berggren, Olofsson, & Silver, 2000), natural logarithm of total asset (Sogorb-Mira, 2003), and sales (Abor, 2007) as a proxy to the variables. Regardless of the proxy used, most of the studies find that the long-term debt has a positive relationship with leverage.…”

Section: Sizementioning

confidence: 99%

“…This variable is measured as the ratio of net fixed assets over total assets (Abor, 2007;Esperança, Gama, & Gulamhussen, 2003;Ramlall, 2009). …”

Section: H3mentioning

confidence: 99%

“…The age variable is measured by the number of years SME was in the business by looking at the date of the registration until the year of 2011 (see Esperança, Gama, & Gulamhussen, 2003;Abor, 2007;Ramlall, 2009). …”

Section: Agementioning

confidence: 99%

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The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

Saarani¹,

Shahadan²

2013

ASS

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Capital structure have implications in determining the ability and success of a firm, especially to small and medium-sized enterprises (SMEs). This paper analyses the capital structure of SMEs in Malaysia focusing on Enterprise 50 (E50) SMEs. E50 is an annual awards program initiated by government and organized by SME Corporation & Deloitte Malaysia since 1997 to recognize the 50 best SME companies in Malaysia based on their performances and potential to succeed. The secondary data from Companies Commission of Malaysia has been collected for the study. The study employed regression analysis on 334 companies, utilised the accounting data for the five year period of 2005 to 2009. Capital structure is the Dependent Variable referring to debt ratio of the companies, decomposed into Long Term Debt ratio and Short term Debt ratio. The Independent Variables (IV) are age; size; tangibility; liquidity; profitability; growth and taxation. Two theories of capital structure have guided this study i.e. the Trade-Off Theory and the Pecking Order Theory. The study found that size is important if we decomposed the debt into longand short term. In addition, asset tangibility, liquidity and profitability are the main capital structure determinants for SMEs. Age and growth are important for a long term, while taxation is not an important consideration in capital structure decision.

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“…9, No. 6;2013 71 result is consistent with Pecking Order Theory and previous studies and (Titman & Wessels, 1988) and (Abor, 2007).…”

Section: Profitabilitysupporting

confidence: 81%

Section: Sizementioning

confidence: 99%

“…This variable is measured as the ratio of net fixed assets over total assets (Abor, 2007;Esperança, Gama, & Gulamhussen, 2003;Ramlall, 2009). …”

Section: H3mentioning

confidence: 99%

Section: Agementioning

confidence: 99%

See 2 more Smart Citations

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

Saarani¹,

Shahadan²

2013

ASS

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“…Some find positive leverage-performance relation while others believe conversely and describe debt as negative connotation (Abor, 2010). Even some researchers find insignificant or inconsistent results in this respect (Fama & French, 1998;Lemmon & Zender, 2001).…”

Section: Introductionmentioning

confidence: 99%

Firm Size as Moderator to Non-Linear Leverage-Performance Relation: An Emerging Market Review

Farooq

Jibran

2017

Binus Business Review

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The purpose of this research was to investigate leverage-performance relation with moderating firm size in developing countries like Pakistan. Data were collected from 304 Pakistani non-financial firms for the period of 2005-2013. It is found that overall leverage-performance relation is negative for all types of firms. However,such losses are more prominent for small size firms. Results also show that the leverage-performance relation is nonlinear for medium and large size firms. However, these firms are not targeting optimal level and overleveraging that ultimately decrease their profits. So, financial managers of small size firms should avoid debt financing while for large and medium size firms, managers need to adjust their debt ratio to its optimal level.

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Does the Ind AS moderate the relationship between capital structure and firm performance?

M N,

Shenoy,

Chakraborty

et al. 2023

J Corp Accounting Finance

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In line with the wide implementation of IFRS around the globe, the significant shift in the Indian accounting system appertained to the Ind AS is expected to have a substantial impact on the firm‐level information environment. Nevertheless, the question of whether the adoption of such standards moderates the relationship between leverage and firm performance remains unanswered. In this backdrop, we aim to close this research gap employing 3120 firm‐year observations from 401 Indian non‐financial firms for a period from 2013 to 2022. Notably, we found that the leverage among Indian firms discourages profitability. Further, the adoption of Ind AS negatively moderates the leverage and firm performance association. The findings suggest that the enhanced transparency and the firm's reporting quality dissuade risk‐averse investors from investing in highly levered companies. As a result, investors avoid risky investments, and firms must strive to foster their trust and motivation. The conclusion of the present research draws significant implications for management and policymakers while also contributing to the ongoing debate on capital structure and firm performance.

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Debt policy and performance of SMEs

Cited by 147 publications

References 32 publications

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

Firm Size as Moderator to Non-Linear Leverage-Performance Relation: An Emerging Market Review

Does the Ind AS moderate the relationship between capital structure and firm performance?

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