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Appears in Collections:Management, Work and Organisation Journal Articles
Peer Review Status: Refereed
Title: The Happy Story of Small Business Financing
Authors: Carter, Sara
Vos, Ed
Yeh, Andy Jia-Yuh
Tagg, Stephen
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Issue Date: Sep-2007
Publisher: Elsevier
Citation: Carter S, Vos E, Yeh AJ & Tagg S (2007) The Happy Story of Small Business Financing, Journal of Banking and Finance, 31 (9), pp. 2648-2672.
Abstract: We examine two data sets, one from the UK (n = 15,750) and one from the US (n = 3239), to show that SME financial behaviour demonstrates substantial financial contentment, or ‘happiness’. We find fewer than 10% of the UK firms seek significant growth and only 1.32% of US firms list a shortage of capital other than working capital as a problem. Financial performance indicators (growth, return on assets, profit margin) were not found to be determinants of SME financing activities, as might be expected in a ‘rational’ risk–return environment. Younger and less educated SME owners more actively use external financing – even though more education reduces the fear of loan denial – while older and more educated (‘wiser’) SME owners are found to be being less likely to seek or use external financing. The contentment hypothesis for SME financing also extends to high-growth firms in that we show that they participate more in the loan markets than low-growth firms. By way of contrast to the finance gap hypothesis, the contentment hypothesis observes the importance of social networks (connections) [for finance] and confirms the ‘connections – happiness’ linkage in the literature on happiness while doubting the theoretical suitability of Jensen and Meckling [Jensen, M., Meckling, W., 1976. Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 3, 305–360.] base-case analysis for SMEs.
Type: Journal Article
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Rights: The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author; you can only request a copy if you wish to use this work for your own research or private study.
Notes: Sara Carter is now employed at the University of Strathclyde
Affiliation: University of Stirling
University of Waikato
Reserve Bank of New Zealand
University of Strathclyde

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