Signalling through the noise: private certification, information asymmetry and Chinese SMEs’ access to finance

Minard, Paul

doi:10.1080/17516234.2015.1083412

Cited by 18 publications

(13 citation statements)

References 38 publications

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“…According to Abe et al (2015), an information-sharing mechanism that contains small businesses' credit rating and borrowing history may promote transparent lending terms and conditions by financial institutions. Minard (2016) observed that firms know their capacity to pay loans more than creditors; hence banks allocate funds due to their inability to distinguish high from low-quality firms. Limiting information asymmetries will bring efficiencies in the allocation of credit and potentially enhance small-scale businesses' growth.…”

Section: Improvement In Information Asymmetrymentioning

confidence: 99%

“…Limiting information asymmetries will bring efficiencies in the allocation of credit and potentially enhance small-scale businesses' growth. According to Minard (2016), firms can use signaling in the form of certifications, which is a costly exercise but is proof of a firm's quality. Organizations can also use the issuance of debts and payment of dividends as effective signals to provide assurances to the lenders of their quality by bearing these costs.…”

Section: Improvement In Information Asymmetrymentioning

confidence: 99%

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Innovative Strategies For Social-Economic Development Financial Strategies In The Development Country

Ogochukwu¹,

Kasztelnik

2021

SEC

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This research paper summarizes the arguments and counterarguments within the scientific discussion on the Small and medium scale enterprises constitute the backbone of any nations economic development and had remained a major contributor in poverty alleviation, employment generation, and industrialization. The purpose of this phenomenological study was to explore the lived experiences of small and medium scale enterprise owners in the development country, regarding the raising of finances from lending institutions to ensure their business growth and sustenance. A phenomenological qualitative approach for this study as it empowers the researcher to investigate the lived experiences of participants to gain a deep understanding of the small number of participants who had raised funding from financing institutions and how to improve their experiences thereby reducing the challenges while seeking for financing. The relevance of this scientific problem discussion from the organizational life cycle theory and working capital management theory to emphasize the concept of study environment, financing institutions, knowledge, and experience of small business owners. Key findings emerged that within the business environment, there are lack of government policies to support small businesses, and financing institutions are not favorably disposed to support small and medium scale business. The wide-ranging factors discussed in this article also brought to fore additional financing strategies adopted by small businesses as alternatives to banks funding, the effect adequate funding will have their operations and the improvement required by government, financing institutions and owners of small businesses to support the growth and development of small businesses. The results of the research study may contribute to positive social change by creating awareness amongst small and medium scale business owners on the best financial strategies to fund their operations to remain profitable and sustained. The research study highlighted the need for both the government and financing institutions to support small businesses to function effectively to remain relevant, continue to generate more employment, improve the living standard of the owners of small business, and ultimately impact development country at large. Finally, this study added to the existing literature on small and medium scale enterprises financing strategies, their challenges, and their means to ameliorate the difficulties experienced by their owners when seeking for funding from lending institutions.

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Section: Improvement In Information Asymmetrymentioning

confidence: 99%

Section: Improvement In Information Asymmetrymentioning

confidence: 99%

Innovative Strategies For Social-Economic Development Financial Strategies In The Development Country

Ogochukwu¹,

Kasztelnik

2021

SEC

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“…Forkuoh et al [50] argued that it is hard for SMEs to access external finances due to information asymmetry and their inability to credibly signal the external financial institutions their real capacity to repay debts. Minard [51] and Nanyondo et al [52], through their empirical studies, found that when SMEs can credibly signal unobserved firm quality to the external financial institutions, this will reduce information asymmetry and improve their access to finance.…”

Section: Information Asymmetrymentioning

confidence: 99%

Alleviating Financing Constraints of SMEs through Supply Chain

Yang

Chen

et al. 2019

Sustainability

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Small and medium-sized enterprises play a crucial role in sustaining economic development in both developed economies and developing economies, however, many of them suffer from chronic and structural difficulties in accessing external financing. In this paper, we develop a theoretical framework to illustrate how information structures work in the strategic interactions between banks and firms in a supply chain, and why the transaction information in a supply chain may serve to reduce information asymmetry and improve SMEs’ access to external financing. We find that under incomplete information, the transactions between SMEs and suppliers can serve as signals for banks, which may help banks access the private information of SMEs, thus reducing information asymmetry between them. To maximize profit, banks should dynamically adjust both their interest rate policies and risk management strategies when providing financing services to SMEs, according to the structure of the financial market. The improvement of the external financial environment for SMEs may benefit the entire supply chain, thus facilitating its sustainable development and the growth of SMEs. Our framework sheds light on how SMEs in a supply chain may enhance their survivability and facilitate their development through appropriate strategies to improve business performances and manage credit risks.

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“…Qualitycert is another binary variable for possession of a quality certificate by firms. Recent studies report increasing adoption of quality certification issued by the International Organization for Standardization (ISO) as a signal of a potential high‐quality firm to the lender which reduces its financial constraints (Minard ). To control for the possible effects of participating in networks, which may help in easing financial constraints, we use the variable cluster.…”

Section: Baseline Modelmentioning

confidence: 99%

Does the Caste of the Firm Owner Play a Role in Access to Finance for Small Enterprises? Evidence from India

Raj

Sasidharan

2018

The Developing Economies

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This study examines whether caste affiliation influences the ability to obtain credit from institutional sources. We employ Fourth All India Census of Micro, Small and Medium Enterprises 2006–2007 data to empirically verify this relationship. We conduct an econometric analysis of loan outcomes by the caste affiliation of the firm owner and observe that firms owned by socially disadvantaged groups have a lower probability of obtaining formal credit even after controlling for differences in creditworthiness and other factors. Our results also show that discrimination by formal credit institutions extends to the amount of the loan sanctioned. These results thus suggest that affirmative action programs in India have not had much impact on credit market access for socially marginalized entrepreneurs, and policymakers should address this concern by introducing special programs and regulatory incentives to encourage banks and others to increase their lending toward these disadvantaged groups.

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Signalling through the noise: private certification, information asymmetry and Chinese SMEs’ access to finance

Cited by 18 publications

References 38 publications

Innovative Strategies For Social-Economic Development Financial Strategies In The Development Country

Innovative Strategies For Social-Economic Development Financial Strategies In The Development Country

Alleviating Financing Constraints of SMEs through Supply Chain

Does the Caste of the Firm Owner Play a Role in Access to Finance for Small Enterprises? Evidence from India

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