Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270267 
Year of Publication: 
2021
Citation: 
[Journal:] Cogent Business & Management [ISSN:] 2331-1975 [Volume:] 8 [Issue:] 1 [Article No.:] 1912524 [Year:] 2021 [Pages:] 1-23
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Previous studies have identified various factors underlying firm financing structure especially in large firms. However, few have attempted to document the reasons for financing preferences among microenterprises in developing countries. Employing a managerial-based theory, this study explores the financing preferences of microenterprises and factors that influence their preference towards external financing. Based on 310 valid replies to a questionnaire survey conducted among Malaysian microenterprises, it finds a clear financing hierarchy where internal funding sources are preferred to external finance. It also underscores the important role of external financing sources. Applying structural equation modelling, the study demonstrates that information on external financing, level of internal funding, growth intention, networking ties and owner's experience exert significant effects on external financing preferences. In addition, business age and the relative location of a business from banks and/or finance agencies appear to have a significant confounding influence on the results. The empirical evidence contributes to the limited but growing literature on financing preferences by revealing the simultaneous effects of managerial characteristics on financing preferences in the context of microenterprises.
Subjects: 
Capital structure
microenterprises
microfinance
entrepreneurial financing
SMEs
small business
developing country
Malaysia
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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