This investigation assessed the influence of formal financing for small and medium-sized enterprises (SMEs) on the economic advancement of Nigeria, utilising annual time series data ranging from 1992 to 2022. Employing the Cobb-Douglas framework, control variables, including capital formation and labour, which could influence economic development, were incorporated into the empirical model to mitigate bias. Following initial tests for stationarity, it was determined that all variables achieved stationarity upon the first difference, a finding that validated the Vector Error Correction Mechanism (VECM) application. The analysis revealed that the credit extended to SMEs by commercial banks and the loans provided by microfinance banks exhibited a negative and significant influence on economic development, as measured by GDP per capita, in both the long and short term. The negative coefficients associated with the credit from commercial banks to SMEs and the loans from microfinance banks indicate that these financial institutions have not yet catalysed the requisite leap in Nigeria's economic development, probably due to the negative effects of unstable interest rates on lending. Both gross capital formation and labour demonstrated a significant impact on GDP per capita; however, the effect of labour was found to be negative. Consequently, it was concluded that financing for SMEs through commercial banks’ credit and microfinance bank loans had a negative and significant effect on Nigeria's economic development. The study recommended that policymakers and regulatory bodies should empower and facilitate formal financial institutions, such as commercial banks and microfinance banks, to extend financial services to SMEs, thereby enhancing their productivity.
One of the most misunderstood components of valuing a small closely-held business is how to address the impact of small size. Most closely-held enterprises are relatively small in size, with market values less than $1million. Many small mom and pop operations, or single owner-operator family businesses, often have market values even smaller. The most common method to account for size is to use the size premium reports from Kroll or another financial data service provider. However, these small firm premiums are determined exclusively from publicly-traded firms, where even the category of the smallest publicly-traded firms are still magnitudes larger than the typical small closely-held firm. This study examines the Kroll size premium data on publicly-traded firms and compares it with an analysis of size data from a proprietary database of closely-held firm transactions. We develop various models that better assess the impact of size on the cost of equity calculations for small, closely-held firms.
This study provides the first empirical assessment of the causal impact of bureaucratic corruption on firms' financial constraints in Nigeria by calculating treatment effects using linear and non-linear estimators to account for potential heterogeneous treatment effects across firm groups. Formally, the theoretical framework models how corruption may facilitate or restrain firms' financial access by shaping their cost functions, which consequently influences their success or failure and ability to raise the collateral for borrowing. My analysis, using the bivariate probit method and two binary instruments, reveals that corruption significantly increases the probability of a representative MSME and firm being financially constrained by approximately 62 to 64 and 61 to 63 percentage points, respectively. When the IV estimator is utilized to calculate local effects, I find that the effect is about 90 to 91 percentage points for a typical MSME facing obstacles with obtaining business licenses and permits and tax administration, respectively. The effect is 92 percentage points for all firms using both instruments. Furthermore, the results show that Nigerian MSMEs are about 17 to 19 percentage points more likely to be financially constrained than large firms and that corruption's impact on firms' access to finance does not depend on firm size. Finally, firms that perceive corruption as a ``minor" barrier experience the most difficulty obtaining external finance. This study highlights the severe constraint that corruption poses to Nigerian firms' access to finance and advocates for regulatory amendments to address issues with the tax administration and the ease of obtaining business licenses and permits.
We examine the performance of initial public offerings (IPO) using a stochastic dominance approach that captures investors’ preferences for higher moments of the returns distribution. Using a comprehensive sample of 6,671 IPOs in the U.S. from 1980 to 2012, we find no evidence that IPOs underperform size and book-to-market matched portfolios. We find that the market portfolios do not second-order stochastic dominate IPOs with VC-backing, backed by high reputation VCs, low debt IPOs, or those backed by growth capital. We also examine the IPO performance in booms vs. recessions as well as in times of low vs. high sentiment. Overall, our results shed additional light on investor preferences in IPO returns, extend the role that capital backing plays in IPO performance, and highlight the importance of considering higher order moments in performance evaluation.
This study aims to explain the survival and exit outcome of franchise startups compared to other types of startups. Small business owners choosing to become franchisees have high expectations about business survival since “franchise is a proven business model that carries less risk.” Using the Kauffman Firm Survey, we examine the survival patterns and M&A exit outcomes of a large sample of U.S. independent and franchise businesses started in 2004 and tracked over time for eight years. Our study provides unique results on the likelihood of survival and M&A exit of franchises relative to other startups. Although franchise businesses start larger, are very well-capitalized, and are led by highly educated owners, we find no significant difference in the survival rate between franchises and independent businesses. However, our results show a significant difference between the survival rate of franchises and those businesses started by purchasing “existing” firms. When the outcome is an M&A exit, the results show that franchises are 2.77 times more likely to exit via M&A than independent businesses, whereas “existing” businesses are 1.81 times more likely to exit via M&A than independent businesses. Overall, this study sheds more light on the controversial evidence on the survival and exit prospects of a large cohort of U.S. franchises, independent new businesses, and “existing” businesses.
This article examines recent literature on corporate boards and the interplay between director gender and CEO turnover and how it affects firm performance after CEO turnover. The primary focus is board gender diversity and CEO job embeddedness in entrepreneurial firms. This article discusses gender diversity and the frequency of CEO turnover. This paper finds that board gender diversity is associated with lower CEO involuntary turnovers and better overall performance in entrepreneurial firms. The article highlights how board gender diversity, especially in small firms, provides a unique pathway to create firm value and examines recent evidence on how gender diverse board decreases the likelihood of CEO turnover, thus saving small firms from costly CEO replacement and poor firm performance after the CEO turnover.
The underlying research study was concerned with public venture capital which is grounded in the assumption of market failure and financing gaps (Güllmann 2000; Brettel 2005) and associated with the risk of crowding-out (Colombo et al. 2016). In order to expand the research perspective and to shed new light on the public investors, this project was concerned with their strategy, with their social networks, their syndication rationales, their monitoring and mentoring in turnaround situations and their exit routes between 2015 and 2017. 67 governmental investors in Belgium, The Netherlands, Luxembourg, Austria and Germany were invited to participate in a fully structured survey. In addition, secondary data sources were examined regarding the developments of the venture capital markets, of the crowdfunding markets and of the business angels' investments in the underlying countries between the phase of the financial crisis and the recent COVID-19 pandemic. The data was analysed by means of descriptive statistics and the survey results were finally validated by an additional validation study. The results, inter alia, showed that the public investors maintained comprehensive networks with different types of network partners and that social capital (Burt 1993; Lin 1999) played an important role for their business and not the provision of financings alone. Nevertheless, the results also showed that the network size did not matter for exit success on a statistically significant level and that the recent developments on the macro level called the public involvement in question.
The objective of the paper is to assess the contribution of alternative sources of financing to the survival of SMIs through an analysis of start-ups in Cameroon. Our study employs a qualitative multisite case study methodology. Data was collected from both documentary and primary sources. For the primary data, we conducted semidirected interviews with five start-ups operating in four fields of activity (agriculture, health, finance and ICTs) to assess in depth the behaviour of various promoters who have received alternative financing at least once. The results of our manual and automated analysis led to two major findings: firstly, it is possible to identify alternative financing in the environment of Cameroonian start-ups in the form of social capital (help from loved ones, support from elites and families, community fundraisers, tontines) on the one hand, and crowdfunding on the other. Secondly, these two means of alternative financing are significant sources of added value for the survival of start-ups not only through the preparation and precreation activities (social capital) but as important levers in improving the organizational strategies of start-ups (fundraising among individuals and the possibility of marketing through platforms).
Purpose of this article is to find out whether determinants of women entrepreneurship are different from those of men's entrepreneurship in general and specifically in Côte d'Ivoire. To do this, we conducted a quasi-experimental analysis using non-parametric and parametric approaches to survey data on a sample of 161 entrepreneurs in Côte d'Ivoire, 113 of whom were women and 48 men. Our survey was designed and conducted to neutralize the socio-demographic and conjunctural differences between men and women entrepreneurship in order to produce matched data. Our analysis shows that determinants of male and female entrepreneurship in Côte d'Ivoire are not fundamentally different if rationality matters.
We examine the relation between ownership structure and M&A target selection when family firms pursue public firm acquisitions. We find that family firm acquirers select targets that have lower Tobin's Q relative to non-family acquirers. Our results suggest that family firms choose to acquire less glamorous targets against which they can better negotiate. The market reacts more positively to these family firm acquisitions at announcement and out to one year. It is family firm target selection skill along with negotiation skill that leads to the favorable market reception.
Microfinance Institutions (MFIs) were introduced to reach a large number of active poor people who are excluded from the formal financial institutions due to rigorous collateral requirements. As an instrument of MFIs, Microfinance was introduced to address the financial need of the active poor people. To operate successfully MFIs have to unquestionable ensure that the loan expended to the Micro and Small Enterprises (MSEs) have to be repaid back so as he MFIs can have a financially sustainable and viable operation. In light of this, this research study was conducted to analyze the factors affecting loan repayment of MSEs financed by Somali Microfinance institution by taking lender characteristics in to consideration. Both primary and secondary data was employed. The primary data was collected by distributing questionnaire and through interview. A total of 175 MSEs were selected using purposive sampling technique. The secondary data was acquired from various issues of annual reports of Somali microfinance institution and other concerned institutions. Both descriptive analysis and econometric model, which is, binary logistic regression was employed to analyze the effect of the literature driven variables on loan repayment by MSEs. The econometric model used revealed that among the variables hypothesized to affect loan repayment are loan repayment period, grace period, and timeliness of loan release have statistically significant effect on loan repayment by the MSEs Whereas loan size have statistically insignificant effect on loan repayment by the MSEs.
: This study investigates determinants of Egyptian SMEs financial failure predictability based on a sample of 32 failure SMEs and 28 non-failure SMEs for the period 2013 and 2019. The determinants of SMEs financial failure are categorized into four groups; Working Capital, Asset Structure, Liquidity, and Leverage. The factor and logistic regression analysis are employed to identify the most significant independent variables that classify between failure and none- failure Egyptian’s SMEs and determine the driver of SMEs financial failure. Our findings significantly show that failing SMEs suffer from long cash conversion cycles resulting from long inventory holding period, average collection period, and short average payment period, in addition to lower liquidity, excessive use of debt to assets, and lower fixed assets percentage, in contrast to non-failure Egyptian’s SMEs.
Graduate unemployment remains a concern for many African countries. However, in recent years there has been a growing interest in entrepreneurship among young people. The objective of this research is to study the entrepreneurial motivation of young graduates. Through primary data collected from students of the FSEG's entrepreneurial bachelor's degree programme and using a multiple linear regression model, it was found that: attitudes associated with behaviours have a positive and significant impact on the decision to become an entrepreneur. Social norms are determining factors in the explanation of entrepreneurial intention and finally, factors associated with perceived control contribute significantly to the explanation of entrepreneurial intention. In the light of these results, it would be wise for authorities to implement actions aimed at reinforcing the attitudes associated with student behaviour through entrepreneurial culture. In this case, a strong political determination is needed through legislation to make entrepreneurship a factor in bringing down unemployment among university graduates.
Business angels (BAs) and venture capitalists (VCs) are important sources of finance for entrepreneurs in emerging markets for raising start-up and growth capital. Recognising that entrepreneurial investment evaluation decision-making is a highly complex process, and that there are limited studies focused on evaluation criteria used by both BAs and VCs', this article undertakes an empirical investigation by identifying, classifying and statistically testing the rank importance of investment criteria in South Africa from an early-stage entrepreneurial perspective. Results indicate that the rank importance for the different investment criteria is relatively similar for VCs and BAs, and the only ranking difference observed was on the team preparedness and team attributes, relevant for early-stage entrepreneurs. An empirical study of this nature is important as unique insights emerge from testing multiple investment evaluation criteria used by VCs, BAs and early-stage entrepreneurs in an African emerging country context.
An entrepreneur shares business risk with the investors providing capital for her firm. Risk sharing is per se beneficial, but also results in an agency problem from diminished incentives for the entrepreneur. This classical trade-off depends on the financial contracting between the entrepreneur and the financier. As an alternative to debt or equity, we consider musharaka financing, an Islamic profit and loss sharing contract. First, we show that debt is inferior to equity or musharaka even though debt financing ensures first best efforts in our model. Whether financing with equity or by use of musharaka results in higher utility for the entrepreneur depends on how the firm's risks are related and on the structure of the costs the entrepreneur has to bear when spending effort.
This paper proposes to analyze the effects of access to credit on the performance of SMEs in Congo. To this end, we used the theoretical model developed by Stiglitz and Weiss (1981). From an econometric point of view, we estimated a multiple linear regression model using the ordinary least square technique due to the absence of endogeneity. This application, as well as the statistical and econometric analyses that followed, were carried out using microeconomic data from the survey of very small, small, medium-sized enterprises and artisans in the Congo, which was carried out thanks to the multiple contributions of the managers of the National Institute of Statistics (INS). As a result, it was found that access to credit is neutral with respect to the performance of SMEs. This result led to an economic policy implication.
This paper is research devoted to the self-employment of students of the International University of Excellence of Bamako through the teaching of entrepreneurship as a factor in the development of entrepreneurial intention among students in training. This choice is explained by several factors: the State's recruitment capacities in the public service are limited; the modern private sector which constitutes the natural outlet for young graduates is not in a position to offer employment for the many promotions of students trained annually who constitute thousands of people who increase the non-working population. It is becoming necessary to put in place systems that allow young graduates, especially those in training, to set up their own account through entrepreneurship. The practical study led us to consider the case of the International University of Excellence of Bamako. To study it, we focused our work on teaching entrepreneurship as a factor in the development of the entrepreneurial intention and self-employment of Students. As the parent population, we have a database of 236 students, from first to third year undergraduate students of the 2019 - 2021 academic years. This population is distributed between the different fields (Finance - accounting, Projects and organizations Management, Money - Finance - Banking and Insurance, Marketing-Communication, International Trade, Logistics - Transport, Business Intelligence). The information collected and processed will allow us to have a series of data on the possibilities offered by the teaching of entrepreneurship in terms of productivity of students of the International University of Excellence of Bamako before obtaining a university degree but also, to have an overview of self-employment and the teaching of entrepreneurship as a factor in the development of entrepreneurial intention and self-employment of the students of the International University of Excellence (IUE).
This paper provides an economic model resulting in two distinct marketing strategies available to investment bankers. First, we hypothesize that an increased selling effort by brokers is used most effectively when the investment clientele is uninformed. Second, adjusting the offer price of the issue is hypothesized to be employed primarily in large IPOs with a clientele of sophisticated investors, consistent with Shiller's Impresario Hypothesis. Our pre-IPO bubble (1981-1996) empirical results yield evidence supporting both selling mechanisms. Under-demanded small IPO issues are 'pushed' by the brokers, while some under-demanded large IPO issues instead increase the offer price, with large first-day turnover characteristics of flipping. Both types of issues experience large and significant negative long-term returns, as share prices eventually return to the equilibrium price. For the post-IPO bubble period (1997-2017), the Impresario Hypothesis is empirically supported, but the push strategy is not, indicating a partial shift in selling mechanisms post bubble.
This paper seeks to ascertain the influence of financial literacy and financial consumer protection on digital financial access. The objectives of the study were to find out the effect of financial literacy on digital monetary access, and to find out the effect of f consumer financial protection on digital access of finances of SMEs in Sub County of Ruiru in County government of Kiambu, Kenya. Financial Literacy Theory, Information Asymmetry Theory and Social Learning Theory are the theories that guided formulation of study's objectives. Descriptive research design was used with the population of interest comprising of all SMEs owners in Ruiru Sub County in Kiambu County. The sample size for the study was 384 respondents derived byFisher (1998) formula. Primary data as collected by use of questionnaires. Descriptive statistics of mean, frequency, percentages and standard deviation were used combined with inferential analysis of correlation as well as multiple regression to analyse the data. Findings of the study indicated that financial literacy and financial consumer protection significantly and positively influence on digital financial access of SMEs. The paper concluded that an improvement in the knowledge of financial products, developing a financial attitude towards the long term, debt management literacy of SME owner, financial product choice knowledge and having the ability to make informed decisions regarding finances generally improves digital financial access of SMEs.
Our study explores the impact financial crisis has on performance of microfinance institutions in Zimbabwe employing the Vector Autoregression using annual time series data from 1990 to 2018. The findings from our study revealed a positive impact of financial crisis on performance of Microfinance Institutions. We also found a positive effect of gross domestic product, money supply, the first lag of inflation and exchange rates on microfinance institutions performance while the second lag of inflation has a negative effect. Variance decomposition results reveal an increasing long run positive effect of financial crisis on performance is increasing. From impulse response analysis, one standard deviation shock to financial crisis causes microfinance institutions performance to significantly fluctuate up to period 10 where the graph of performance becomes negative. The study recommended policy makers to enforce clearness in all MFIs so as to uncover any form of disfigurement in the financial sector's balance sheets. Tightening regulation of MFIs will also go a long way in ensuring their success. For MFIs to benefit from the positive impact of the exchange rate and inflation on their performance, the government needs to work on reviving the value of the Zimbabwean dollar and make it more competitive internationally.
