Richard G.P. McMahon

Owner-manager Gender, Financial Performance and Business Growth amongst SMEs from Australia’s Business Longitudinal Survey

The principal objective of this article is to ascertain the extent to which owner-manager gender appears to influence the financial performance and business growth of over 2000 SMEs taken from the Australian federal government’s Business Longitudinal Survey (BLS) for three financial years from 1995-6 to 1997-8. The research findings reported in the article provide substantial empirical evidence that consistent statistically significant differences in financial performance and business growth do not exist between female and male owner-managed concerns once appropriate demographic and other relevant controlling influences are taken into account. The scholarly and policy implications of this result are briefly considered.

Growth and Performance of Manufacturing SMEs: The Influence of Financial Management Characteristics:

PROFESSOR RICHARD MCMAHON IS head of the School of Commerce at Flinders University, South Australia. This paper describes a study of financial management characteristics on business growth and performance among .small and medium-sized enterprises (SMEs) engaged in manufacturing. Nonlinear principal components analysis is used in empirically capturing key enterprise and financial management characteristics. Polytomous logistic regression modelling reveals the influence on business growth and performance of the enterprise and financial management characteristics considered. Enterprise characteristics seem to dominate in their impact upon SME achievement, with financial management characteristics, other than use of external financing being relatively unimportant. Development orientation and the existence of internal and external constraints upoIn growth appeail the most influential enterprise characteristics.

Business Growth and Performance and the FinancialReporting Practices of Australian Manufacturing SMEs

This article describes an explanatory study of the impact of financial reporting practices upon business growth and performance outcomes amongst small and medium‐sized enterprises (SMEs) engaged in manufacturing in Australia. The study is able to establish some statistically significant bivariate associations between the extent and frequency of financial reporting undertaken and certain measures of SME growth and performance. However, the state of financial reporting practices becomes subsumed by other important influences in multivariate analysis. Management is a complex activity affected by a myriad of interacting internal and external factors, and must inevitably be undertaken in an holistic manner in SMEs. Particular practices make a contribution to the whole task without necessarily standing out as all‐embracing solutions to problems generally encountered. Thus, it is argued that improved financial reporting should be realistically viewed as simply part of a broader competence in financial management which, taken together with other functional capabilities, is likely to lead to more effective and efficient management of SMEs and significantly improve their prospects.

Understanding the Small Enterprise Financial Objective Function

This paper presents views on the small enterprise financial objective function that are sympathetic to existing financial thought, but which capture complexities arising in small enterprises that frequently receive minimal attention in the mainstream finance literature. It is argued that the small enterprise financial objective function should reflect the kinds of enterprise-specific risk that typically exist in small enterprises arising from liquidity, diversification, transferability, flexibility, control, and accountability considerations. A conceptualization of the small enterprise financial objective function by extension of conventional utility theory is presented. It is believed the resulting utility function holds promise as an explanatory framework for financial behavior in small enterprises in that it provides valuable insights into owner-manager decision making and small enterprise development. Consideration is also given to asset pricing model, which consequently might be used in small enterprise financial management.

Pecking Order Theory And The Financial Structure Of Manufacturing SMEs From Australia’s Business Longitudinal Survey

Abstract The principal objective in this paper is to ascertain the extent to which Myers’ ( 1984) Pecking Order Theory (POT) of business financing appears to explain financial structure amongst a panel of 871 manufacturing SMEs legally organised as proprietary companies, taken from the Australian federal government’s Business Longitudinal Survey for three financial years from 1995-96 to 1997-98. The research findings reported in the paper provide further substantial empirical evidence broadly suggesting pecking order financing behaviour amongst SMEs. However, the findings also suggest the need for a modified POT that more fully reflects the special circumstances and nuances of SME financing. A full specification for a modified POT of financing for SMEs is proposed as a basis for further inquiry in the area.

Cross‐industry differences in SME financing behaviour

Purpose – Aims to ascertain the extent to which industry appears to influence the financing behaviour of a sample of Australian small and medium‐sized enterprises (SMEs).Design/methodology/approach – The research employs data for several thousand SMEs taken from the Australian federal governments Business Longitudinal Survey undertaken over four financial years from 1994‐1995 to 1997‐1998. The principal analytical technique employed is logistic regression modelling with various financial structure measures as dependent variables, and with industry as the independent variable of central interest.Findings – The research findings reported in the paper provide substantial empirical evidence that cross‐industry differences in financing behaviour do exist even after controlling for other relevant influences on SME financing choices such as enterprise size, business age, profitability, growth, asset structure and risk. The key finding is that industry does not simply proxy for one or more of these other factors...

Ownership structure, business growth and financial performance amongst SMEs

Purpose – The purpose of this research is to examine in some depth the relationships between ownership structure, business growth and financial performance amongst small and medium‐sized enterprises (SMEs) with different degrees of overlap between management and ownership.Design/methodology/approach – The research employs panel data for 1,872 SMEs legally organised as proprietary companies, taken from the Australian federal governments Business Longitudinal Survey for three financial years from 1995‐1996 to 1997‐1998.Findings – The study finds that there is no statistically significant relationship between the proportion of equity held by SME managers and achieved business growth in the businesses examined. Furthermore, for most financial performance measures examined, it would appear that there is no statistically significant relationship between the proportion of equity held by SME managers and achieved financial performance in the businesses examined.Originality/value – This is the first such investig...

Growth and Financial Profiles Amongst Manufacturing SMEs from Australia's Business Longitudinal Survey

The principal objective of this paper is to compare and contrast financial profiles for a longitudinal panel of 871 small and medium-sized enterprises (SMEs) In the Australian manufacturing sector that have embarked upon different development pathways and to examine possible connections between enterprise growth and the experience of common financial problems. Collectively, the findings represent a departure from much received knowledge in SME financial scholarship. The experience of growth seems not to have influenced the return on Investment, asset structure, financial structure, liquidity and solvency ratios of the SMEs studied; but the margin, operating expenses, turnover, and financing expense ratios do appear to be affected by growth. Overall, the financial profiles produced are quite unremarkable; there Is no evidence of problematic financial consequences of growth. The only differences in financial profiles found are those that are readily explained by differences in the scale or growth resource needs of the businesses examined.

Growth, Exporting and Innovation in Manufacturing SMEs: Evidence from Australia’s Business Longitudinal Survey

Abstract Two broad hypotheses are examined in this paper. The first is that, in small and medium-sized enterprises (SMEs), linkages exist between growth, exporting and innovation that are statistically significant and persistent over time. Overall support is found for this hypothesis. The second hypothesis examined is that knowledge of exporting and innovation behaviour can be reliably used to anticipate SME growth potential for research and policy purposes. Support for this hypothesis is less compelling.

Modelling the Extent of Financial Reporting Practices amongst Australian Manufacturing SMEs

This paper describes an exploratory study of financial reporting practices amongst small and medium-sized enterprises (SMEs) engaged in manufacturing in Australia. Non-linear principal components analysis is employed in empirical derivation of an overall measure of the comprehensiveness of financial reporting practices undertaken in the SMEs investigated. Non-linear principal components analysis is also used in empirically capturing the business context in terms of enterprise and financial management characteristics. Polytomous logistic regression modelling reveals development orientation, extent of owner-management, technological complexity, degree of reliance upon external financial advice, and the financial reporting climate to be the most significant influences on the extent of financial reporting practices in the SMEs under study. Of the business context factors identified, development orientation and financial reporting climate seem to have greatest impact. The study appears to reinforce the impression that SME growth is a key driver towards more sophisticated financial reporting practices. Alternately, better financial reporting may be viewed as an important enabling factor in realising the growth aspirations of such concerns.