Financial Constraints, Risk Taking and Firm Performance: Recent Evidence from Microfinance Clients in Tanzania

Willebrands, Daan; Boermans, Martijn Adriaan

doi:10.2139/ssrn.2177842

Cited by 15 publications

(21 citation statements)

References 95 publications

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“…However, studies have inadvertently underexplored the impact at the micro level. Some studies concluded a positive relationship between financial growth and firm performance [60][61][62].…”

Section: Discussionmentioning

confidence: 99%

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

et al. 2019

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In many developing countries, obtaining financial services at affordable rates and fair terms has been a significant challenge for small and medium enterprises (SMEs). However, this issue has not been paid much attention in Vietnam, even though SMEs account for about 95% of total enterprises and the financial market of the country has not been well developed. This study investigates the causal effects of access to finance on productivity of SMEs operating in the manufacturing sector in Vietnam. Productivity was measured as the total factor productivity (TFP) obtained by production function estimation using the Levinsohn and Petrin approach. Regarding financial accessibility, two factors covered the extent to which firms might have a bank loan or overdraft facility were employed. To study the causal inferences of access to finance on firm productivity, the research adopted the difference-in-differences (DID) approach, as well as the propensity score matching (PSM) coupled with DID technique. The empirical results indicated that improving the financial accessibility could directly enhance firm productivity. Particularly, it was shown that firms having access to a bank loan could significantly improve TFP by approximately 8.6% in the DID model and about 9% in the PSM-DID model. Meanwhile, the firm average TFP increased by approximately 12.3% and 15.7% in simple DID and PSM-DID models, respectively, when firms had an overdraft facility. These findings suggest that the government should put more effort into assisting SMEs in generating bankable projects, and create a sound and healthy financial environment to stimulate firms’ access to finance, which will ensure their sustainability and growth.

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“…However, studies have inadvertently underexplored the impact at the micro level. Some studies concluded a positive relationship between financial growth and firm performance [60][61][62].…”

Section: Discussionmentioning

confidence: 99%

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

et al. 2019

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“…Fafchamps and Schündeln (2013) examined the relationship between local financial development and firm performance in Morocco; Boermans and Willebrands (2011) analysed the influence of financial constraints on firm performance and Atieno (2009) examined linkages between access to finance and the performance of small-scale enterprises in Kenya. Berman and Hericourt (2009) investigated the influence of access to finance among other finance-related factors and their influence on the entity's decision to buy and sell goods or services at a global stage.…”

Section: Firm Performance and Exporting Behaviourmentioning

confidence: 99%

The impact of SME access to finance and performance on exporting behaviour at firm level: A case of furniture manufacturing SMEs in Zimbabwe

2018

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Milanzi (2012) also acknowledged the importance of SMEs and their contributions towards a nation's total exports. In that regard, Edmunds and Khoury (1986) provided evidence revealing Orientation: Globally, the majority of Small and Medium-sized entities (SMEs) are resource constrained. As a result, not all SMEs are able to fully exploit the benefits associated with international trade as they face challenges when exporting their produce.Research purpose: This article presents an investigation into the impact of access to finance on firm performance and exporting behaviour of SMEs in Harare, Zimbabwe.Motivation for the study: The article stems from the observation that although there is a growing importance and contribution of SMEs worldwide, research has shown that only a few of these SMEs are involved in international trade.Research design, approach and method: A cross-sectional study was employed with quantitative methods being utilised. The collected data were analysed using a structural equation modelling technique, which employed the Smart partial least squares software (version 2.0). Main findings:The key findings reveal that a significant positive relationship between access to finance and SMEs exporting behaviour does exist. Furthermore, the study's findings challenge the notion that firm performance has a significant impact on exporting behaviour and show a negative impact of access to finance on SME firm performance. Practical/managerial implications:There is a need to put systems in place in Zimbabwe that that will (1) prioritise the need to have clear routes to market and increase awareness among SME owners, and (2) help SMEs overcome high costs associated with participating in export of goods and services. Contribution/value-add:The article provides a unique empirical analysis of the relationship that exists between access to finance, firm performance and export behaviour of SME firms in Zimbabwe, and thereby makes a valid contribution to SME literature.

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“…Both risk propensity and risk perception need to be accounted for when explaining firm performance. A number of studies suggest that the concept of risk taking is more complex and that in addition to risk propensity the perception of risk is important as well (e.g., Boermans and Willebrands, 2012;Cressy, 2006;Dana, 1995;Gibcus et al, 2009;Gundolf and Jaouen, 2005;Kraus et al, 2012;Sitkin and Pablo, 1992;Willebrands et al, 2012).…”

Section: Related Literaturementioning

confidence: 99%

Entrepreneurship, risk perception and firm performance

Boermans

Willebrands

2017

IJESB

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Risk attitudes of entrepreneurs are well-established drivers of business performance. Most empirical studies in this field only take into account risk propensity, leaving out the complementary concept of risk perception. Using data on 611 entrepreneurs from Tanzania, we show that risk perception is positively associated with business performance. In addition, we classify the entrepreneurs in four different groups based on their risk profile. The results show that the worst performing entrepreneurs are those with low risk perception and high risk propensity.

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Financial Constraints, Risk Taking and Firm Performance: Recent Evidence from Microfinance Clients in Tanzania

Cited by 15 publications

References 95 publications

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

The impact of SME access to finance and performance on exporting behaviour at firm level: A case of furniture manufacturing SMEs in Zimbabwe

Entrepreneurship, risk perception and firm performance

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