Debt policy and performance of SMEs

Emerald - Tập 8 Số 4 - Trang 364-379 - 2007
JoshuaAbor1
1University of Stellenbosch Business School, South Africa, and University of Ghana Business School, Legon, Ghana

Tóm tắt

PurposeThe purpose of this research is to examine the effect of debt policy (capital structure) on the financial performance of small and medium‐sized enterprises (SMEs) in Ghana and South Africa. Previous studies, especially on large firms, have shown that capital structure affects firm performance. Though the issue has been widely studied, largely missing from this body of literature is the focus on SMEs.Design/methodology/approachPanel data analysis is used to investigate the relations between measures of capital structure and financial performance.FindingsUsing various measures of performance, the results of this study indicate that capital structure influences financial performance, although not exclusively. By and large, the results indicate that capital structure, especially long‐term and total debt ratios, negatively affect performance of SMEs. This suggests that agency issues may lead to SMEs pursuing very high debt policy, thus resulting in lower performance.Originality/valueThe main value of this paper is the analysis of the effect of debt policy on the performance of SMEs in Ghana and South Africa.

Từ khóa


Tài liệu tham khảo

Abor, J. (2005), “The effect of capital structure on profitability: empirical analysis of listed firms in Ghana”, Journal of Risk Finance, Vol. 6 No. 5, pp. 438‐45.

Baker, S.H. (1973), “Risk, leverage and profitability: an industry analysis”, Review of Economics and Statistics, Vol. 55, pp. 503‐7.

Baltagi, B.H. (1995), Econometric Analysis of Panel Data, Wiley, Chichester.

Chaganti, R., DeCarolis, D. and Deeds, D. (1995), “Predictors of capital structure in small ventures”, Entrepreneurship Theory and Practice, Winter, pp. 1042‐2587.

Champion, D. (1999), “Finance: the joy of leverage”, Harvard Business Review, Vol. 77 No. 4, pp. 19‐22.

Fama, E.F. and French, K.R. (1998), “Taxes, financing decisions, and firm value”, The Journal of Finance, Vol. 53, pp. 819‐43.

Gleason, K.C., Mathur, L.K. and Mathur, I. (2000), “The interrelationship between culture, capital structure, and performance: evidence from European retailers”, Journal of Business Research, Vol. 50, pp. 185‐91.

Grabowski, H.G. and Mueller, R. (1972), “Managerial and stockholder welfare models of firm expenditures”, Review of Economics and Statistics, Vol. 54, pp. 9‐24.

Graham, J.R. and Harvey, C. (2001), “The theory and practice of corporate finance: evidence from the field”, Journal of Financial Economics, Vol. 60, pp. 187‐243.

Hadlock, C.J. and James, C.M. (2002), “Do banks provide financial slack?”, The Journal of Finance, Vol. 57, pp. 1383‐420.

Hammes, K. (1998), “Various aspects of capital structure in Poland”, working paper, Tallin Technical University, Tallin.

Hammes, K. (2003), “Firm performance, debt, bank loans and trade credit. An empirical study”, working paper, Department of Economics, Gothenburg University, Gothenburg.

Heinkel, R. (1982), “A theory of capital structure relevance under imperfect information”, Journal of Finance, Vol. 37, pp. 1141‐50.

Hutchinson, R.W. (1995), “The capital structure and investment decisions of the small owner‐managed firm: some explanatory issues”, Small Business Economics, Vol. 7, p. 231.

Jensen, M. (1986), “Agency cost of free cash‐flow, corporate finance and takeovers”, American Economic Review, Vol. 76, pp. 323‐9.

Jensen, M. and Meckling, W. (1976), “Theory of the firm: managerial behaviour, agency costs and ownership structure”, Journal of Financial Economics, Vol. 3, pp. 305‐60.

Kang, J. and Schivdasani, A. (1995), “Firm performance, corporate governance and top executive turnover in Japan”, Journal of Financial Economics, Vol. 38, pp. 29‐58.

Kaplan, S. and Minton, B. (1994), “Appointment of outsiders to japanese boards: determinants and implications for managers”, Journal of Financial Economics, Vol. 36, pp. 225‐57.

Krishman, S.V. and Moyer, C.R. (1997), “Performance, capital structure and home country: an analysis of Asian corporations”, Global Finance Journal, Vol. 8, pp. 129‐43.

Majumdar, S.K. and Chhibber, P. (1999), “Capital structure and performance: evidence from a transition economy on an aspect of corporate governance”, Public Choice, Vol. 98, pp. 287‐305.

Mesquita, J.M.C. and Lara, J.E. (2003), “Capital structure and profitability: the Brazilian case”, working paper, Academy of Business and Administration Sciences Conference, Vancouver, July 11‐13.

Miller, M.H. and Rock, K. (1985), “Dividend policy under asymmetric information”, Journal of Finance, Vol. 40, pp. 1031‐51.

Modigliani, F. and Miller, M. (1958), “The cost of capital, corporation finance and the theory of investment”, The American Economic Review, Vol. 48 No. 3, pp. 261‐97.

Modigliani, F. and Miller, M. (1963), “Corporate income taxes and the cost of capital: a correction”, American Economic Review, Vol. 53, pp. 443‐53.

Myers, S.C. (1984), “The capital structure puzzle”, Journal of Finance, Vol. 39, pp. 575‐92.

Myers, S.C. and Majluf, N.S. (1984), “Corporate financing and investment decisions when firms have information that investors do not have”, Journal of Financial Economics, Vol. 13, pp. 187‐221.

Nerlove, M. (1968), “Factors affecting differences among rates of return on investments in individual common stocks”, Review of Economics and Statistics, Vol. 50, pp. 312‐31.

Noe, T. (1988), “Capital structure and signaling game equilibria”, Review of Financial Studies, Vol. 1, pp. 331‐55.

Petersen, M.A. and Rajan, R.G. (1994), “The benefits of lending relationships: evidence from small business data”, The Journal of Finance, Vol. 49, pp. 3‐37.

Roden, D.M. and Lewellen, W.G. (1995), “Corporate capital structure decisions: evidence from leveraged buyouts”, Financial Management, Vol. 24, pp. 76‐87.

Ross, S. (1977), “The determination of financial structure: the incentive signalling approach”, Bell Journal of Economics, Vol. 8, pp. 23‐40.

Smith, C. (1986), “Investment banking and the capital acquisition process”, Journal of Financial Economics, Vol. 15, pp. 3‐29.

Taub, A.J. (1975), “Determinants of the firm's capital structure”, The Review of Economics and Statistics, Vol. 57, pp. 410‐6.

Titman, S. (1984), “The effect of capital structure on a firm's liquidation decisions”, Journal of Financial Economics, Vol. 13, pp. 137‐51.

Abor, J. and Biekpe, N. (2005), “What determines the capital structure of listed firms in Ghana?”, African Finance Journal, Vol. 7 No. 1, pp. 37‐48.

Thông tin
Thông tin xuất bản

Emerald

Tập 8 Số 4

364-379

Thông tin tác giả