Study of financing preferences and capital structure among Malaysian SMEs: evidence from enterprise 50 award winners

Mohamed Zabri, Shafie Study of financing preferences and capital structure among Malaysian SMEs: evidence from enterprise 50 award winners. In: ASEAN Entrepreneurship Conference 2012 (AEC 2012), 5-6 November 2012, Kuala Lumpur .

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Abstract

Increasing importance of economic contributions of small and medium sized enterprises (SMEs) around the world particularly in developing countries necessitates better understanding of financial practices among SMEs. This research investigates the financial practices among SMEs in Malaysia among SMEs within the list of Enterprise 50 award winners from 1998 to 2010, focuses on SMEs managers’ level of financing preferences towards available sources of financing, and firm’s capital structure. Electronic surveys were conducted with a response rate of 29.5%. SMEs managers are found to have a higher preference towards debt financing from banking institutions. Results also show that the average debt-to-equity ratio among these SMEs is 57 to 43. Factors affecting manager’s financing preferences and firm’s capital structure are investigated through selected manager’s and firm’s characteristics. Focuses are on the possible association between these characteristics with managers’ level of financing preferences and firm’s capital structure, respectively. The analysis revealed that manager’s business ownership status and level of education have a statistically significant association with their level of financing preferences. Non-debt tax shields, tangibility of assets and firm’s level of liquidity, on the other hand were found to have a statistically significant relationship with firm’s capital structure. This research enhances the existing body of knowledge of financial practices of SMEs, particularly within the context Malaysian SMEs by providing the information on manager’s level of financing preferences and firm’s capital structure.

Item Type:Conference or Workshop Item (Paper)
Uncontrolled Keywords:financing preferences; capital structure; SMEs; Malaysia
Subjects:H Social Sciences > HG Finance
Divisions:Faculty of Technology Management, Business and Entrepreneurship > Department of Management and Technology
ID Code:3351
Deposited By:Ms Aryanti Ahmad
Deposited On:11 Dec 2012 11:04
Last Modified:11 Dec 2012 11:04

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