 SMEs' diversification of financing sources: Strategy or desperation?Myint Moe Chit and Marian Rizov International Journal of Finance & Economics, 2024, vol. 29, issue 3, 3123-3146 Abstract: The paper's objective is to provide a large sample evidence on small and medium enterprises' (SMEs) financing source diversification patterns. We use the large World Bank Enterprise Survey (WBES) sample of SMEs from 135 developing and emerging economies. We find that the extent of financing source diversification is significantly affected by firm‐specific and country‐specific characteristics. Commonly, (unconstrained) SMEs specialise their financing in retained earnings. However, SMEs experiencing financial constraints often rely on diversified financing sources. We provide theoretical justification and empirical evidence of a quadratic relationship between financial constraints and financing source diversification: SMEs experiencing a moderate degree of financial constraints use the most diversified sources of financing. This finding, combined with the evidence that financially unconstrained SMEs use fewer financing sources, suggests that diversification of financing sources by SMEs is a strategic choice based on the optimal complementarity of financing sources achieved through the credit multiplier channel. Date: 2024 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:29:y:2024:i:3:p:3123-3146 Ordering information: This journal article can be ordered from Access Statistics for this article International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.