What does the owner‐manager want and get out of the business?

Abstract

Purpose

The paper seeks to explain the differences in drawings (e.g. owner‐manager dividends and salary) strategies among small business managers to show that owner‐managers' personal work values impact on the strategic choices of firms. It also examines the relationships between owner‐managers' work values and the amount of dividends the entrepreneurs take out of the business in order to follow the chosen strategy.

Design/methodology/approach

This paper contributes to the existing knowledge of entrepreneurship and small business management. Legal constraints and strategic motivations are essential to drawings strategy. The paper analyses the owner‐managers' work‐related values as a potential determinant of the drawings strategy. The empirical data used to test the hypotheses were drawn from a mail survey and financial statements. The final drawings strategy scales were formed with the help of exploratory factor analysis.

Findings

The findings provided evidence that work values are related to drawings strategy factors, and the factors reflect entrepreneurs' attitudes to drawings taken out of the business. However, the authors could not find any relationship between the drawings strategy and how entrepreneurs behave when they actually take dividends.

Practical implications

The findings of this research surprisingly provided evidence that entrepreneurs are unaware of the peremptory provisions of the Finnish Limited Liability Companies Act. When entrepreneurs decide on the amount of dividends, tax legislation clearly dominates their decision making. This could lead to a situation where the entrepreneur takes more dividends than the solvency test of the Finnish Limited Liability Companies Act allows.

Originality/value

This paper contributes to the existing knowledge of entrepreneurship and small business management.

Citation

Sjögrén, H., Puumalainen, K. and Syrjä, P. (2011), "What does the owner‐manager want and get out of the business?", International Journal of Law and Management, Vol. 53 No. 5, pp. 355-374. https://doi.org/10.1108/17542431111166340