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A direct measurement of corporate financial constraints of SMEs and large firms in Mauritius. A firm level survey analysis

Chakeel Prayagsing and Kheswar Jankee
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Chakeel Prayagsing: University of Mauritius, Moka, Mauritius
Kheswar Jankee: University of Mauritius, Moka, Mauritius

Theoretical and Applied Economics, 2018, vol. XXV, issue Special, 175-196

Abstract: Researchers have acknowledged that FC is a variable that is not directly observable or available on the balance sheet of companies. In this Paper, we extend the literature on FC and provide evidence on variables that directly measure the FC in a well-defined sample of Mauritian enterprises. These are: firms’ dividend payment behaviour and perceptions on same; forms of dividend payments and policies adopted; preferred choice for financing long term projects and financing difficulties of firms & the sources of finance used. Both a deductive and quantitative strategies are adopted to provide for a direct measurement of FC. Data from a stratified sample of the top 100 companies as well as a unique firm level survey data obtained from a sample of 300 SMEs via simple random sampling are used. Results obtained from these samples serve the purpose of the research given that firms from two different extremes are studied as follows: the top largest 100 firms and the SME’s. The top 100 firms are those with high asset values and financial position. They mainly belong to group structures and operate internal financial markets amongst sister companies. Hence, FC is expected to be low for such companies. In contrast, SMEs are basically small and medium enterprises and can be characterized as having difficult access to financial markets caused by excessive cost of finance due to asymmetric information and moral hazard. It is found that both large firms and SMEs are financially constraint, the degree of FC however varying on the corporate structure of firms.

Keywords: financial constraints; direct measures; survey; deductive approach; dividend. (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:agr:journl:v:xxv:y:2018:i:special:p:175-196