The impact of external financing on firm value and a corporate governance index

SME evidence

Basil Al-Najjar, Dana Al-Najjar

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Purpose: The purpose of this paper is to investigate the effect of external financing needs on both firm value and corporate governance mechanisms within the UK SME context. This framework is of importance because of the limited external financial resources SMEs might face.
Design/methodology/approach: The authors consider the endogeneity problem between corporate governance mechanisms and firm value, and hence, the three stages least squares and the instrumental variables based on two stages least squares estimation methods are employed.
Findings: The authors find a positive relationship between external financing needs and firm value. In addition, the authors detect that size and profitability are positively associated with firm value in the sample. Concerning the corporate governance index (CGI), the authors detect that big SMEs and those with low-debt levels have better corporate governance structures.
Originality/value: The authors employ a CGI for the sample which is constructed using ten corporate governance variables. The authors also examine different factors that affect SMEs 2019 governance by applying different models including logistic analysis.
Original languageEnglish
Pages (from-to)411-423
Number of pages13
JournalJournal of Small Business and Enterprise Development
Volume24
Issue number2
DOIs
Publication statusPublished - 1 Mar 2017
Externally publishedYes

Fingerprint

Governance indexes
External financing
Firm value
Corporate governance
Small and medium-sized enterprises
Corporate governance mechanisms
Design methodology
Logistic model
Two-stage least squares
Profitability
Financial resources
Debt
Endogeneity
Instrumental variables
Three-stage least squares
Factors
Governance
Governance structure

Cite this

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abstract = "Purpose: The purpose of this paper is to investigate the effect of external financing needs on both firm value and corporate governance mechanisms within the UK SME context. This framework is of importance because of the limited external financial resources SMEs might face.Design/methodology/approach: The authors consider the endogeneity problem between corporate governance mechanisms and firm value, and hence, the three stages least squares and the instrumental variables based on two stages least squares estimation methods are employed.Findings: The authors find a positive relationship between external financing needs and firm value. In addition, the authors detect that size and profitability are positively associated with firm value in the sample. Concerning the corporate governance index (CGI), the authors detect that big SMEs and those with low-debt levels have better corporate governance structures.Originality/value: The authors employ a CGI for the sample which is constructed using ten corporate governance variables. The authors also examine different factors that affect SMEs 2019 governance by applying different models including logistic analysis.",
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The impact of external financing on firm value and a corporate governance index : SME evidence. / Al-Najjar, Basil; Al-Najjar, Dana.

In: Journal of Small Business and Enterprise Development, Vol. 24, No. 2, 01.03.2017, p. 411-423.

Research output: Contribution to journalArticle

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AB - Purpose: The purpose of this paper is to investigate the effect of external financing needs on both firm value and corporate governance mechanisms within the UK SME context. This framework is of importance because of the limited external financial resources SMEs might face.Design/methodology/approach: The authors consider the endogeneity problem between corporate governance mechanisms and firm value, and hence, the three stages least squares and the instrumental variables based on two stages least squares estimation methods are employed.Findings: The authors find a positive relationship between external financing needs and firm value. In addition, the authors detect that size and profitability are positively associated with firm value in the sample. Concerning the corporate governance index (CGI), the authors detect that big SMEs and those with low-debt levels have better corporate governance structures.Originality/value: The authors employ a CGI for the sample which is constructed using ten corporate governance variables. The authors also examine different factors that affect SMEs 2019 governance by applying different models including logistic analysis.

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