Financial preferences of listed SMEs in India: An empirical study

Authors

  • Sushma Verma Vivekanand Education Society’s, Institute of Management Studies and Research, Hashu Advani Memorial Complex, 495/497 Collector’s Colony, Chembur, Mumbai, India
  • Samik Shome Institute of Management, Nirma University, Sarkhej - Gandhinagar Highway, Gota, Ahmedabad, India
  • Aakruti Patel Institute of Management, Nirma University, Sarkhej - Gandhinagar Highway, Gota, Ahmedabad, India

Abstract

Small and Medium-sized Enterprises (SMEs) play a very significant role in boosting sustainable economic growth and development of any country. The present study examines various firm-specific determinants that have an impact on the financing choice of the listed Indian SMEs. It also studied the financing practices of the listed SMEs in India and tried to find out if their financing pattern follows the established theories of Corporate Finance. The study selected 113 SMEs listed on the NSE Emerge Exchange for the period between 2014 and 2018. To examine the problem, empirical analysis is done with the help of panel data regression. The study finds that for meeting financial requirements of listed SMEs, they prefer current liabilities first, then total reserves, thereafter short-term borrowings and lastly the long-term borrowings. Among the independent variables chosen based on an extensive literature survey, most of them are statistically significant but are depicting lower explanatory power. Hence, it leads to the possibility of some other firm-specific factors or macroeconomic factors being more relevant in deciding the listed firm’s financing choices. The study concludes that no single theory like Pecking Order Theory (POT) or Trade-Off Theory (TOT) can explain the financing behaviour of listed SMEs completely. It contributes to the extant literature on listed SMEs by attempting to examine the impact of listing on the financing patterns of the SMEs.

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Author Biographies

Sushma Verma, Vivekanand Education Society’s, Institute of Management Studies and Research, Hashu Advani Memorial Complex, 495/497 Collector’s Colony, Chembur, Mumbai, India

Dr. Sushma Verma is a faculty in Finance. She has experience of industry as well as academics. Since last ten years she is in the field of academics teaching various subjects within the domain of finance at post graduate level in various courses affiliated to University of Pune and University of Mumbai. She is the author of two books in Advanced Financial Management and Financial Risk Management. She is also on the editorial board of two International Journals. Her research interests lie in exploring commercial viability of Renewable energy in every possible application, analysing bankruptcy across sectors and in understanding various aspects of corporate finance.

Aakruti Patel, Institute of Management, Nirma University, Sarkhej - Gandhinagar Highway, Gota, Ahmedabad, India

Ms. Aakruti Patel has done her master’s in business administration (finance) and currently pursuing her Ph.D. (Full-Time) from Institute of Management, Nirma University, Gujarat. Her area of specialization is accounting and financial management. Prior to joining as doctoral scholar, she has worked for industry (1 year) as well as academics (6 years). Her field of research is corporate finance – prediction of financial distress and detecting earnings management.

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Published

2021-08-11

How to Cite

Verma, S., Shome, S., & Patel, A. (2021). Financial preferences of listed SMEs in India: An empirical study. Journal of Small Business Strategy, 31(3), 88–101. Retrieved from https://libjournals.mtsu.edu/index.php/jsbs/article/view/1690

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