Search results
1 – 10 of over 4000
This study investigates the significance of trade credit (TC) as an alternative source of funding in financing the growth of financially dependent firms.
Abstract
Purpose
This study investigates the significance of trade credit (TC) as an alternative source of funding in financing the growth of financially dependent firms.
Design/methodology/approach
Panel data analysis using the difference generalized method of moments (GMM) and fixed-effects ordinary least squares (FE-OLS) is conducted on annual data from publicly listed firms across a number of developing economies. The data cover the period from 2003 to 2019.
Findings
The findings indicate that financially dependent firms rely on TC to manage their growth, especially when they have exhausted their debt capacity. This dependence on TC displays a cyclical pattern. As firms enhance their financial position, they tend to scale back their dependence. Nevertheless, firms with significant growth opportunities continue utilizing TC for at least two years after their initial identification as financially dependent.
Practical implications
The author's conclusion highlights that TC can be a valuable and accessible source of funding, especially in developing economies where the real sector may require alternative financing channels. Hence, TC has the potential to play a very significant role in financing corporate growth in these economies.
Originality/value
The current study adds to the existing body of literature by revealing that access to alternative sources of finance is also critical for firms that are dependent on external sources and for firms that have exhausted their financial debt capacity.
Details
Keywords
Viktor Ström, Nima Sanandaji, Saeid Esmaeilzadeh and Mouna Esmaeilzadeh
The purpose of this paper is to investigate the potential link between Sweden’s high reliance on equity capital financing among small and medium-sized enterprises (SMEs) and its…
Abstract
Purpose
The purpose of this paper is to investigate the potential link between Sweden’s high reliance on equity capital financing among small and medium-sized enterprises (SMEs) and its recognition as the most innovative economy in Europe according to the European Innovation Scoreboard (EIS). This paper examines the idea that the high levels of trust within Swedish society can explain why private equity financing is more prevalent among Swedish SMEs.
Design/methodology/approach
To test these ideas, the authors use data from the Survey on Access to Finance for Enterprises to measure the private equity reliance of firms. The authors also use the EIS to measure the innovation capacity of nations and various aspects of SMEs’ innovation activities. Finally, societal levels of trust are measured through the World Value Survey.
Findings
First, the authors find that European countries with a higher proportion of SMEs relying on equity financing tend to be ranked as more innovative by the EIS. Second, the authors find that the correlation between a nation’s share of SMEs relying on equity financing and their level of innovation activities is marginally stronger for product innovations than for business process innovations. Third, the authors find that countries with higher levels of trust tend to have higher equity capital reliance among SMEs.
Originality/value
This study builds upon previous research on equity capital and SMEs’ innovation activity while introducing new insights into the relationship between societal trust and equity financing.
Details
Keywords
Aaron van Klyton, Mary-Paz Arrieta-Paredes, Vedaste Byombi Kamasa and Said Rutabayiro-Ngoga
The study explores how the intention to export affects financing and non-financing variables for small and medium-sized enterprises (SMEs) in a low-income country (LIC). The…
Abstract
Purpose
The study explores how the intention to export affects financing and non-financing variables for small and medium-sized enterprises (SMEs) in a low-income country (LIC). The objectives of this study are (1) to discern between regional and global exporting and (2) to evaluate its policymaking implications.
Design/methodology/approach
Primary survey data were collected from 330 Rwandan SMEs and were analysed using ordered logistic models as an application of the expectation-maximisation iterating algorithm, which was tested for robustness using a sampling model variation.
Findings
The results show that alternative sources of finance are the predominant choice to finance the intention to export within and outside Africa. As the scope of export intentions broadened from regional to global, there was a shift in preferences from less formal to more formal lending technologies, moving from methods like factoring to lines of credit. Moreover, reliance on bank officers became more significant, with increasing marginal effects. Finally, the study determined that government financing schemes were not relevant for SMEs pursuing either regional or global exporting.
Practical implications
Whilst alternative sources of finance predominate the export intentions of Rwandan SMEs, establishing a robust banking relationship becomes crucial for global exporting. Despite this implication, the intention to export should prompt more transparent communication regarding government financial support programmes. There is an opportunity for increased usage of relationship lending to customise support for SMEs involved in exporting, benefiting both the private and public sectors.
Originality/value
This study accentuates how export distance alters SME financing priorities. The results also contribute to understanding how the value of relationship lending changes when less familiar markets (i.e. global exporting) are the objective. Moreover, the study offers a new perspective on how institutional voids affect entrepreneurial financing decisions in LICs.
Details
Keywords
Arbenita Kllokoqi, Ardi Parduzi and Jeton Mazllami
The purpose of this study is to examine the financial challenges faced by agricultural enterprises in the Republic of Kosovo. It aims to compare the various forms of financing…
Abstract
Purpose
The purpose of this study is to examine the financial challenges faced by agricultural enterprises in the Republic of Kosovo. It aims to compare the various forms of financing used in Kosovo with those in European Union (EU) countries. The study seeks to highlight opportunities and challenges with a focus on how they can learn from the experiences of EU countries.
Design/methodology/approach
The study is based on responses from agricultural enterprises in both the EU and Kosovo. Data was gathered through a survey conducted with 50 agricultural enterprises in Kosovo, whereas for EU context, information from the 2020 Survey on the Financial Needs and Access to Finance of EU Agricultural Enterprises (provided by EAFRD). Statistical data were processed using the Stata and SPSS programs.
Findings
In agriculture sector, loan is the primary form of financing to expand their activities and capacities, whereas financing for agricultural enterprises exhibits a negative relationship with the bureaucratic procedures associated with financing.
Research limitations/implications
The main research’s limitations include the unavailability of official data from the relevant institutions in Kosovo.
Practical implications
A possible implication arising from this research is the reliance of the development of agriculture enterprises on debt.
Social implications
Due to the lack of comprehensive data in this regard, is unable to analyze the specific impact of gender in financing patterns of these enterprises.
Originality/value
This study provides real data on the current situation of agricultural enterprises in Kosovo. Considering Kosovo’s goal to integrate with the EU, this comparative approach adds significant value to the study.
Details
Keywords
Osama El-Ansary and Aya M. Ahmed
This paper aims to investigate whether managerial overconfidence has an impact on investment inefficiency beyond its influence on the use of internal financing or whether internal…
Abstract
Purpose
This paper aims to investigate whether managerial overconfidence has an impact on investment inefficiency beyond its influence on the use of internal financing or whether internal financing behaves as a full intermediary.
Design/methodology/approach
The study employed three dependent variables, namely business investment scale, overinvestment and underinvestment, and analyzed data from 282 firms across five different industries listed in 11 Middle East/North Africa (MENA) countries between 2013 and 2019 using regression analysis via least square dummy variable (LSDV).
Findings
The findings indicate that while internal financing can provide funding for investment opportunities and address capital shortages, it may also result in overinvestment, particularly in companies led by overconfident managers.
Practical implications
Stakeholders, including shareholders and board of directors, should pay attention to the chief executive officer (CEO)'s behavioral aspects such as overconfidence in decision-making while undertaking new investment projects. Additionally, regulators and policymakers in emerging markets like MENA should re-evaluate the corporate governance framework, devise a corporate governance index and promote boardroom gender diversity as it can significantly reduce risk.
Originality/value
This study adds to the limited research on the impact of managerial overconfidence on investment efficiency in the MENA region. By focusing on this region, which has unique economic, political and social characteristics, the study provides new insights into the role of behavioral biases in investment decision-making in emerging markets.
Details
Keywords
Siti Nor Suriana Hj Talip and Shaista Wasiuzzaman
The authors investigate the role of financial literacy in influencing the relationship between human capital and social capital, with access to finance of micro, small and medium…
Abstract
Purpose
The authors investigate the role of financial literacy in influencing the relationship between human capital and social capital, with access to finance of micro, small and medium enterprises (MSMEs).
Design/methodology/approach
Data were gathered from 337 MSMEs in Brunei Darussalam, and analysis on the data was carried out using a number of statistical methods. The relationships between human capital, social capital, financial literacy and access to finance were analyzed using PLS-SEM.
Findings
The results show that human capital does influence access to finance but contrary to previous studies, the influence is negative. Financial literacy is an important element in the relationship between human capital, social capital and access to finance, although it plays a greater role in the relationship between social capital and access to finance. Further analysis shows that financial knowledge is significant in moderating the relationships between human and social capital with access to finance. Financial skills is found to only moderate the relationship between social capital and access to finance.
Originality/value
To the authors' knowledge, this study is the first that integrates the human capital, social capital, financial literacy and access to finance in a single model. The authors also highlight the importance of enhancing the financial literacy of MSMEs so that the problem of access to finance can be alleviated, especially in developing countries.
Details
Keywords
Rongrong Shi, Qiaoyi Yin, Yang Yuan, Fujun Lai and Xin (Robert) Luo
Based on signaling theory, this paper aims to explore the impact of supply chain transparency (SCT) on firms' bank loan (BL) and supply chain financing (SCF) in the context of…
Abstract
Purpose
Based on signaling theory, this paper aims to explore the impact of supply chain transparency (SCT) on firms' bank loan (BL) and supply chain financing (SCF) in the context of voluntary disclosure of supplier and customer lists.
Design/methodology/approach
Based on panel data collected from Chinese-listed firms between 2012 and 2021, fixed-effect models and a series of robustness checks are used to test the predictions.
Findings
First, improving SCT by disclosing major suppliers and customers promotes BL but inhibits SCF. Specifically, customer transparency (CT) is more influential in SCF than supplier transparency (ST). Second, supplier concentration (SC) weakens SCT’s positive impact on BL while reducing its negative impact on SCF. Third, customer concentration (CC) strengthens the positive impact of SCT on BL but intensifies its negative impact on SCF. Last, these findings are basically more pronounced in highly competitive industries.
Originality/value
This study contributes to the SCT literature by investigating the under-explored practice of supply chain list disclosure and revealing its dual impact on firms' access to financing offerings (i.e. BL and SCF) based on signaling theory. Additionally, it expands the understanding of the boundary conditions affecting the relationship between SCT and firm financing, focusing on supply chain concentration. Moreover, it advances signaling theory by exploring how financing providers interpret the SCT signal and enriches the understanding of BL and SCF antecedents from a supply chain perspective.
Details
Keywords
Khadar Ahmed Dirie, Md. Mahmudul Alam and Selamah Maamor
The sustainable development goals (SDGs) devised by the United Nations (UN) call on countries – whether rich or poor – to solve global issues, improve lives and save the planet…
Abstract
Purpose
The sustainable development goals (SDGs) devised by the United Nations (UN) call on countries – whether rich or poor – to solve global issues, improve lives and save the planet for future generations. However, the UN predicts that between $5 and $7tn will need to be spent annually between now and 2030 to accomplish these goals, posing a major financial hurdle. Islamic social finance, if used ethically, seeks to realise SDGs through fairness, justice and equity. Thus, this study aims to determine how Islamic social finance instruments such as Zakat, Waqf, Sadaqat and Qard-hasan contribute to realising SDGs.
Design/methodology/approach
This study used a preferred reporting items for systematic reviews and meta-analyses-based systematic literature review. Scopus and Google Scholar were chosen for the qualitative and meta-analysis of studies. The topic was reviewed in 178 academic papers from 2000 to 2022. The required articles were analysed after careful review.
Findings
Islamic social financing mechanisms have the capacity to solve many social issues and create better welfare conditions by ensuring economic, social and environmental sustainability in line with the SDGs. Indonesia and Malaysia lead Islamic social finance research, the survey found. The review revealed that Islamic social funding can achieve 11 out of 17 SDGs. Islamic commercial finance can be used for the remaining goals. The paper highlights Islamic social funding research limitations and opportunities.
Research limitations/implications
The review study shows that Islamic social finance can fill the SDG funding gap, especially considering the post-pandemic financial crisis that has increased global income inequality and social disparities.
Originality/value
To the best of the authors’ knowledge, this article is the first of its kind to review the potential of Islamic social financing instruments to help achieve the SDGs.
Details
Keywords
Financing remains a serious concern for firms and is considered the main hurdle in the growth and development of small and medium enterprises (SMEs). Recently, a new stream of…
Abstract
Purpose
Financing remains a serious concern for firms and is considered the main hurdle in the growth and development of small and medium enterprises (SMEs). Recently, a new stream of financing (SCF; supply chain finance) has emerged to meet the financing issues of SMEs. Therefore, measuring SCF is essential to support SMEs’ operations. This study aims to develop and validate the SCF scale based on extant literature.
Design/methodology/approach
Using a mixed-method approach, this study recruited different samples of SME entrepreneurs to confirm the internal consistency, assess construct validity and check the item structure of the SCF scale in AMOS.
Findings
The outcomes of confirmatory factor analysis demonstrated the six factors of SCF (inventory financing, working capital optimization, reverse financing, fixed assets financing, logistics financing and order cycle financing) spread over 21 items. An interitem solid structure of the SCF scale offers invaluable contributions to the supply chain management literature.
Practical implications
This research supports SME entrepreneurs to obtain secure financing at the best cost, mitigating the risk of default, supporting the buyers’ payment terms, providing early payment to suppliers and strengthening the firm’s value chains. SMEs can obtain financing per their requirements to support their operational business processes. Moreover, SMEs can plan, manage and control finance-related transactional activities by correctly identifying financing solutions.
Originality/value
The present study contributes to SCM literature by developing and validating the SCF scale. To the best of the author’s knowledge, this is the first study that redefined SCF and identified its six dimensions.
Details
Keywords
Ting Tang, Haiyan Xu, Kebing Chen and Zhichao Zhang
The purpose of the study is to investigate the financing channels and carbon emission abatement preferences of supply chain members, and further examine the optimal contract…
Abstract
Purpose
The purpose of the study is to investigate the financing channels and carbon emission abatement preferences of supply chain members, and further examine the optimal contract design of the retailer.
Design/methodology/approach
This paper develops a low-carbon supply chain composed of one retailer and one manufacturer, in which the retailer provides trade credit to the manufacturer. Considering the cap-and-trade regulation, the manufacturer with uncertain yield makes decision on whether to invest in emission abatement. There are bank loan and trade credit to finance production for the manufacturer and green credit to finance emission abatement investment. Meanwhile, the retailer may provide the manufacturer with three kinds of contracts to improve emission abatement efficiency, namely, revenue sharing, cost sharing or both sharing.
Findings
The results show that the retailer prefers to offer financing service at lower interest rate, but trade (and green) credit financing is always optimal for manufacturer and supply chain. The investment in emission abatement is value-added to all players. The sharing contracts offered by the retailer at lower sharing ratios can realize Pareto improvement of the system regardless of the financing scheme. However, comparing with the revenue or cost sharing contract, the existence of optimal sharing ratios makes the both sharing contract more favorable to the retailer.
Practical implications
The findings provide guidance for the emission-dependent manufacturer in financing and emission abatement decisions, as well as recommendations for the retailer to offer loan service and sharing contract.
Originality/value
This paper integrates green credit into bank loan or trade credit to analyze the financing decision of the manufacturer with uncertain yield and further considers the influence of three kinds of sharing contracts introduced by the retailer on improving operational performance.
Details