Financial Management in SMEs

Jindřichovská, Irena

doi:10.35808/ersj/405

Cited by 52 publications

(41 citation statements)

References 17 publications

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“…As financial management is the centre of the overall management system in a small business (Meredith, 1986) the ineffectiveness and inefficiencies of financial conduct have detrimental effects on the longevity and performance of an SME. As most problems of SMEs have a financial nature (OECD, 2006), poor financial management is a critical and common cause of business failures in SMEs (Jindrichovska, 2013). Particularly lack of financial management knowledge combined with uncertainty of the business environment often leads SMEs to face serious problems regarding financial and overall performances, which can even threaten the survival of the enterprise (Kaya & Alpkan, 2012).…”

Section: Introductionmentioning

confidence: 99%

Financial Management Challenges In Small And Medium-Sized Enterprises: A Strategic Management Approach

Karadağ¹

2015

emaj

141

100

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:Due to their significant role in creation of new jobs, rise in GDP, entrepreneurship and innovation, small and medium-sized enterprises (SMEs) are recognized as the the drivers of socio-economic growth, both in developed and developing economies. In Turkey, 99.9 % of all enterprises fall into SME category. Therefore, the significance of SMEs for Turkish economy and society is much higher in Turkey, compared to other emerging and developed countries. Small and medium-sized companies are faced with a number of challenges whereas the problems arising from “poor financial management” are reported as the major causes of business failures in SMEs. Strategic financial management (SFM) which is a research area that has attracted the interest of researchers after 2010, is one of the key managerial areas of SMEs, due to its vital role on the survival, growth and performance of SMEs. The purpose of this paper is to analyze the central role of financial management and identify the financial management challenges and practices that influence the organizational performance in Turkish SMEs, from a strategic management perspective. Within the course of this paper, the importance and challenges of SMEs in Turkey are presented in the first section, while the literature on strategic and financial management in SMEs are reviewed in the second part. In the third section, the recent strategic financial management concept, the implications of strategic financial management practices for SMEs in Turkey and the relationships between strategic financial management practices and SME performance, are discussed. Small and medium sized enterprise finance in Turkey is a developing research area, therefore this paper aims to make a significant contribution to the existing literature by analyzing the major challenges at the conduct of financial management in Turkish SMEs and the influence of strategic financial management practices on the performances of small and medium sized companies in Turkey.Additionally, the conceptual framework developed is expected to be useful to academics in developing an agenda for future empirical research.

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Section: Introductionmentioning

confidence: 99%

Financial Management Challenges In Small And Medium-Sized Enterprises: A Strategic Management Approach

Karadağ¹

2015

emaj

141

100

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“…Looking into the empirical literature, we find that an overwhelming majority of managers' do have a target level for debt maturity structures when making security issue choices (Nor et al, 2011, Zainudin et al, 2017b. In addition, the literature further documents that firms that opt for shorter maturity structures would be more exposed to shocks at the macro level given that they would be forced to renegotiate debt terms more frequently (Jindrichovska, 2013;Custodio et al, 2013;Mallisa and Kusuma, 2017).…”

Section: Introductionmentioning

confidence: 90%

The Impact of Sharia Compliance on the Adjustment to Target Debt Maturity of Malaysian Firms

Hussain¹,

Shamsudin²,

Anwar³

et al. 2018

ERSJ

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This paper investigates the speed of adjustment to target debt maturity for a sample of Malaysian firms based on the sample period of 2007 to 2016. We examine the impact of Sharia compliance on the speed of adjustment to target debt maturity structure by grouping companies based on nature of compliance to Sharia requirements which is categorised by the Securities Commission of Malaysia. In line with our expectations, the analysis shows that firms classified as Sharia compliant tend to adjust at more rapid rates to target debt maturity when below target levels suggesting that compliant firms are able to issue long-term debt at cheaper levels relative to noncompliant counterparts. In addition, the reverse is observed when evaluating firms above target levels where non-compliant firms adjust at more rapid rates. Our findings indicate that compliant firms are able to raise long-term debt at cheaper rates relative to non-compliant firms given the captive market situation observed in the Islamic capital markets in Malaysia. This does however indicate the potential for higher agency costs as well as greater levels of information asymmetry for compliant firms relative to noncompliant firms given that non-compliant firms are more willing to reduce maturity structures to reach target levels when above target levels.

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“…Some few SMEs have taken advantage of the new opportunity to list and raise equity capital but the challenge for SMEs to be able to list even on the Alternative Stock Exchange still persists. The majority of studies of financial management practices of SMEs report that most of SMEs use the payback method or the discounted payback method in evaluating projects compared to a larger organization where the net present value method is preferred (Jindrichovska, 2013;Kilonzo & Ouma, 2015;Turyahebwa, 2013). What is common among most of the studies on financial management practices, that have included investment and capital budgeting as a major component of financial management practice, is the fact that they report a positive association between effective capital investment and budgeting and SMEs performance.…”

Section: Capital Structure Management and Profitability Of Smesmentioning

confidence: 99%

“…There is growing recognition of the important role small and medium enterprises (SMEs) play in economic development in both developed and developing countries (Muneer 2017;Selvanayaki 2016;Karadag, 2015;Jindrichovska, 2013;Abor & Quartey, 2010). SMEs have been described variously in previous literature to be the seed for larger businesses, good and reliable job creator and an important contributor to economic growth and development (Muneer, 2017;Abor & Quartey, 2010).…”

Section: Introductionmentioning

confidence: 99%

Financial Management Practices, Firm Growth and Profitability of Small and Medium Scale Enterprises (SMEs)

Musah

Gakpetor

Pomaa

2018

IMBR

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The study examined financial management practices using four components: working capital management practices, capital structure management, accounting information and financial reporting practice, and the use of capital budgeting techniques and fixed assets management. Performance of SMEs was examined from the context of profitability measured by Return on Assets and of growth. The study sampled 100 SMEs from Accra with data collected through the administration of a questionnaire. Data were analysed using descriptive statistics and Pearson correlation analysis. The results of the descriptive statistics revealed that working capital management practices had the highest mean score, followed by accounting information and financial reporting practices, capital structure management and finally, the use of capital budgeting techniques and fixed assets management, in that order. The Pearson correlation analysis showed a positive association between the four components of financial management practices and between SMEs profitability and growth. The results emphasize the need for SMEs to improve on their financial management practice to improve the profitability and growth of these firms. It is recommended that the use of capital budgeting techniques be improved, as this area of financial management, even though it impacts positively on the performance of SMEs had the least score. Most importantly, the managers of SMEs should use discounted cash flow techniques to evaluate investment and projects before committing the resources of the company. SMEs are encouraged to adopt IFRS for SMEs to enhance their financial reporting practices. This will also improve their decision making and access to capital which will allow these SMEs to expand.

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Financial Management in SMEs

Cited by 52 publications

References 17 publications

Financial Management Challenges In Small And Medium-Sized Enterprises: A Strategic Management Approach

Financial Management Challenges In Small And Medium-Sized Enterprises: A Strategic Management Approach

The Impact of Sharia Compliance on the Adjustment to Target Debt Maturity of Malaysian Firms

Financial Management Practices, Firm Growth and Profitability of Small and Medium Scale Enterprises (SMEs)

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