Corporate Financing and Performance of SMEs:
The Moderating Effects of Ownership Types and
Management Styles
by
Xayphone Kongmanila
Faculty of Economics & Business Management
National University of Laos
and
Graduate School for International Development & Cooperation
Hiroshima University, Japan
&
Tatsuo Kimbara
Graduate School for International Development & Cooperation
Hiroshima University, Japan
ABSTRACT
This paper empirically investigates the moderating effects of ownership types and
management styles to corporate financing on the performance of SMEs. Hierarchical
moderated regression analyses were conducted on data of 160 trading SMEs in
Vientiane Capital City, Lao PDR over the period 2002-2004. The results indicate that
both debt and equity have statistically significant and positive impacts on profitability
when considering the moderating effects of ownership types and management styles.
The explanatory power of the model increases when compared to the model that does
not consider the moderating effects. More specifically, we argue that family-owned
business versus non-family owned business (ownership types), and owner-managed
firm versus outsider-managed firms (management styles), are moderately linked to the
causation from corporate financing to profitability.
Keywords
Corporate financing, trading SMEs, moderating effects, family businesses
1. INTRODUCTION
It has been increasingly recognised that small and medium-sized enterprises (SMEs)
play an important role in a nation’s economy. They make substantial contributions to
employment and comprise the majority of businesses in a nation (Burn & Dewhurst,
1996; Bushong, 1995; Holmes et al., 2003). Particularly, in developing countries, SMEs
are the most important source of new employment opportunities. Therefore,
governments throughout the world attempt to promote economic progress by focusing
on SME development (Happer & Soon, 1979).
* The authors would like to thank Associate Professor Yoshi Takahashi, IDEC, Hiroshima University for
helpful comments.
Many researchers have pointed out that the majority of SMEs are family-owned (Chua
et al., 2004; Gersick et al., 1997; Daily & Dollinger, 1993; Donckels & Frohlich, 1991).
Basically, family-owned SMEs lack financial capital. Particularly, in Lao PDR, SMEs
have difficulty accessing the financial markets. This limitation on financial sources
might have a significant impact on the profitability of SMEs, specifically small and
family-owned firms.
There are two major sources of corporate financing: debt and equity 1 . If financial
sources play a critical role in the performance of SMEs, it would be interesting to
investigate the relationship between different sources of capital, ownership types,
management styles and the performance. Particularly, we address the issue of whether
there exists positive relationship of interaction between both debt and retained earning,
and ownership types and management styles on the profitability of SMEs.
SMEs in Lao PDR generally find it difficult to borrow from a commercial bank because
of inadequate collateral value of assets and unstable cash flows (Souphanh & Mohamed,
2003). Therefore if SMEs can obtain loans from commercial banks, other financial
institutions, or credit from suppliers for capital needs, that can enhance investment
opportunities and the performance of SMEs. On the contrary, internal equity such as
retained earning is a more convenient source of corporate financing for SMEs. Thus if
SMEs are able to secure finance through retained earning, they would also have a good
position in investment opportunities. If so, they would enhance their profitability.
This paper empirically examines the moderating effects of ownership types and
management styles on the relationship between corporate financing and performance of
160 trading SMEs in Lao PDR over period 2002-2004. The results support the notion
that both debt and retained earning are significantly and positively related to
performance. Specifically, these relationships depend on the moderating effects of both
ownership types and management styles.
The organisation of this paper is as follows. The next section provides a literature
review and hypothesis development. The third section describes the methodology and
measurement variable. The fourth section reports empirical results. The last section
covers the discussion and conclusions.
2. LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT
1
Generally speaking equity includes retained earning and issue equity such as common stock and
preferred stock, but in the case of SMEs or family businesses, they prefer retained earning as an internal
source of funds rather than other types of equity.
2
Broadly speaking, current literature has been dealing with the impact of corporate
financing decisions on performance, and the corporate financing decision-making
process especially the effects of ownership types and/or management styles on the
process. In addition, the effect of ownership types and/or management styles on
performance has been also discussed.
The evidence from previous studies on the relationship between corporate financing
and the performance were mixed. Hovakimian et al. (2004) investigates the effect of
corporate financing behaviour and market on the operating performance from 1982 to
2000. They found that equity financing is positively associated with profitability, but
debt financing has no effect on the profitability. McConnell and Servaes (1995)
interpret that debt financing can have either a positive or negative effect on the value of
the firm, depending upon the availability of positive net present value projects to the
firm. Similarly, Jensen (1986) posits a disciplining role for debts, and also suggests a
positive impact of debt on performance in cases of firms with low investment
opportunities, and a negative one in cases where there are many investment
opportunities. Another researcher suggests that some firms get involved with debt in
order to lower their costs in terms of tax, so a positive effect of debt on performance
exists (Graham, 2000). Moreover, Holz (2002) examined the relationship between debt
and profitability in China’s industrial state-owned enterprises during the period of
1993-1999. He found that debt has a positive impact on profitability. However,
McConnell and Servaes (1995) find weak evidence supporting the conjecture that the
allocation of equity ownership among corporate insiders and other investors is of
greater importance in firms with fewer profitable investment opportunities.
As far as SMEs are concerned, the empirical results of previous studies remain with
two faces (both positive and negative). Some empirical evidence has shown that equity
financing has a positive impact on profitability, but the relationship between debt
financing and profitability is mixed. The study of Jordan et al. (1998) suggests that
there is a significantly positive relationship between debt and profitability. On the
contrary, in a study on the relationship between financial capital and profitability for
1,276 small firms in Taiwan from 1992-1997, Fu et al. (2002) found a significantly
positive relationship between equity financing and profitability, but a significantly
negative relationship between debt financing and profitability.
In addition, Ballantine et al. (1993) investigated the relationship between financial
structure and the profitability for small firms. Using data from the Corporate Source
Book of the Statistics of Income, they found lower profits for small firms that use
higher debt. Moreover, Hughes (1997) stresses that the profitability of small firms in
the United Kingdom is lower due to their heavy reliance on debt.
Many researchers point out that small firms in particular tend to have difficulty
accessing the financial markets. Thus small firms are usually forced to finance
themselves through retained earning and debt (loans from commercial bank). The lack
of capital of small firms might lead to lower profitability. The study of Jordan et al.
(1998) on small firms in England found that small firms tend to use retained earning
3
first, then resort to debt when retained earning is used up, and finally to external equity
when borrowing limits are reached. Consistently, Chittenden et al. (1996) in his study
on 3,480 small firms in the United Kingdom, finds that small firms rely more on
internal funds.
On family-owned SME issues, family business literature suggests that business
ownership, independence and family control factors affect owners’ financing decisions
(Neubauer & Lank, 1998; Dreux, 1990). Hutchinson (1995) suggests that entrepreneurs
who have a strong preference for independence tend to utilise equity or retained earning
as sources of finance. Similarly, Storey (1994) points out that small business owners
tend to use short-term debt financing because they are strongly opposed to sharing
ownership. Moreover, Hutchinson (1995) also states that owner-managers who have a
strong desire to retain control of the firm may actively place limits on the use and
growth of equity. Many scholars (Berger & Udell, 1998; Harvey & Evans, 1995)
support this view, having found that issues relating to control and to risk aversion do
influence capital structure and financing decisions.
The study of Gallo and Vilaseca (1996) which empirically investigated the impact of
capital structure behaviour toward investment risk and dividend policy on performance,
found that family firm size is associated with the use of multiple financial institutions
and diverse financial products and that family businesses tend to have low debt to
equity ratio, specifically firms that are market leaders. Family businesses have low
debt-equity ratio in order to avoid damaging their family’s reputation and personal
guarantees and to avoid losing everything in the case of loan failure (Sonnenfeld &
Spence, 1989).
Some researchers (McConaughy, 1999; Kole, 1997) assert that family-controlled firms
and non-family controlled firms differ empirically with respect to performance, value,
capital structure and compensation. There is also the view that family members have
better incentives to manage their firms and actually do so (McConaughy, 1999).
Furthermore, he also argues that knowing the correct cost of capital will enable family
owner-managers to make investment and financing decisions, evaluate performance
and structure rewards for performance. However, to keep in existence ownership types
with family, family proprietors face difficulty in accessing external sources of funds,
placing a limit on long-term profitability. On the other hand, non-family firms can
access to the financial market more easily than family firms, so they might gain longterm profit. Harris et al. (2004) points out that family-owned firms are more likely than
non-family firms to report average or below average financial performance.
Literature on entrepreneurship studies remains unclear whether owner-controlled firms
or non-owner controlled firms are better in terms of performance. Holl (1975) argues
that on average, outsider-controlled firms will exhibit higher growth rate and lower
profit rates than owner-controlled firms. Recent researchers point out that non-owner
managers are interested in performance in terms of growth more than profitability
(Kotey & Slade, 2005; Xayphone, 2006). McEachern (1978) stresses that outsidermanagers prefer profit maximisation more than owner-managers who may opt for non-
4
pecuniary benefits. He also finds that owner-managed firms tend to retain more
earnings and accept more stock market risk than outsider-managed firms. In addition,
Daily and Dalton (1992) find no difference in financial performance between ownercontrolled firms and professional management firms (outsider-managed firms).
Similarly, Daily and Thomson (1994) find no significant relationship between
ownership types and growth in their study on a limited sample.
The results of prior research remain unclear with regards to the differences between
industries2, sizes3 and countries4 in terms of corporate financing and the performance.
The authors observe that there are no hard rule conclusions which can identify the
differences or similarities within industries, sizes and countries. However, the authors
note that previous researchers have not taken the trading sector into their consideration.
Previous research on SMEs, particularly small and family-owned businesses have
mostly failed to investigate the moderating effects of ownership and management styles
on performance. To the authors’ knowledge, owners/managers are an important factor
in the firm’s financing decision as owners/managers will decide whether the use of
equity (retained earning) and debt for their investment is better in terms of performance.
In the Lao PDR context, the authors are assured that both retained earning and debt will
encourage the performance of trading SMEs in Lao PDR. Previous survey and research
on Lao firms have revealed that the main problems of doing business in Lao PDR were
a lack of financial resources and the difficulty to access sources of funds from financial
institutions (Dye & Webster, 1997). Therefore, if firms have high retained earning or
debt-equity ratio, it means they have the potential to perform better than those with
lower ones. Furthermore, they depend on the effects of owners/managers’ attitudes.
Based on these discussions, the authors further develop the hypothesis on the
relationship between corporate financing, ownership types and management styles on
the performance, as follows:
H1:
An SME’s performance is positively related to its interaction
between retained earning and ownership types (family-owned
business versus non-family owned business).
We measure family-owned business and non-family owned in terms of dummy
variables 1 and 0, respectively. Therefore, a significant and positive coefficient of
interaction between retained earning and ownership types indicates that if familyowned business uses retained earning as the source of funding, it would perform better
than a non-family owned business with retained earning, in terms of profitability. On
the contrary, if there is a significant and negative coefficient of the interaction between
retained earning and ownership types, the interpretation would be contradictory (that is,
the non-family owned business would perform better in terms of profitability).
2
The results remain varied with industries.
Large firms and SMEs
4
Developed countries and developing countries
3
5
H2:
An SME’s performance is positively related to its interaction
between retained earning and management styles (owner-managed
firm versus outsider-managed firm).
We measure owner-managed firms and outsider-managed firms as dummy variables 1
and 0, respectively. Therefore, a significant and positive coefficient of interaction
between retained earning and management styles indicates that if an owner-managed
firm managed uses retained earning as the source of funding, it would perform better
than an outsider-managed firm with retained earning, in terms of profitability. On the
contrary, if there is a significant and negative coefficient of the interaction between
retained earning and management styles, the interpretation would be contradictory (that
is, the outsider-managed firm would perform better in terms of profitability).
H3:
An SME’s performance is positively related to its interaction
between debt to equity ratio and ownership types (family-owned
business versus non-family owned business).
The explanation is the same as in H1, but we investigate the interaction between debt to
equity ratio and ownership types on the profitability. Therefore, a significant and
positive coefficient of interaction between debt to equity ratio and ownership types
indicates that family-owned business would outperform non-family owned in terms of
profitability when they select debt as the source of funding.
H4:
An SME’s performance is positively related to its interaction
between debt to equity ratio and management styles (ownermanaged firm versus outsider-managed firm).
The explanation is the same as in H2, but we investigate the interaction between debt to
equity ratio and management styles on the profitability. Therefore, a significant and
positive coefficient of interaction between debt to equity ratio and management styles
indicates that owner-managed firms would outperform outsider-managed firms in terms
of profitability when they select debt as the source of funding.
3. METHODOLOGY
3.1 Sample and data collection
The organisations included in this research are Lao trading SMEs which are formally
registered with the Vientiane Capital City Tax Office (VCCTO), Lao PDR. According
to statistical data from VCCTO year 2004, there are 232 trading firms located in
Vientiane Capital City (VCC) formally registered with the VCCTO. In this study, the
criteria used for selecting a sample from this population included firm size and age
(number of employees from 5 to 99 employees and firm established prior to or in year
6
2002, respectively) and firms that have complete financial reports5 during the period of
2002 to 2004. Using the definition of SMEs in Lao PDR6, there are 160 firms which
match the above conditions. Thus this study uses the 160 firms as the research sample.
The data collection process was conducted by the author and five students of the
Faculty of Economics and Business Management, National University of Laos from 10
to 25 August 2005. Detailed information including the company profile, balance sheet,
and profit and loss sheet of the 160 trading firms for each year of the 2002-2004 period
was collected from VCCTO.
3.2 Measurement Variables
a. Dependent variable
Our models analysed the average performance of trading SMEs over the 2002-2004
period. To conduct the analysis, the authors calculated the profitability (return on equity,
ROE; return on assets, ROA and return on sales, ROS) for each firm from the average
of three years (2002, 2003 and 2004).
To measure a firm’s performance, many management researchers prefer accountingbased variables namely ROE, ROA and ROS. The idea behind these measures is
perhaps to evaluate managerial performance – how well is a firm’s management using
the assets to generate accounting returns of investment, assets or sales. However, since
these measures are used for investigating a firm’s performance in terms of profitability,
this study applies these measures as one proxy variable so-called business performance
composite index (BPCI), which is the mean value of ROE, ROA and ROS:
(ROE+ROA+ROS)/3. The concept of BPCI was suggested by prior researchers (Lee,
1988). Early studies by Hashim (2000) and Xayphone (2006) also followed the
antecedent in using BPCI as a performance measurement (dependent variable) for their
research.
b. Independent variables
As mentioned in the previous section, two major forms of financing sources for firms
are debt (external financing) and equity (internal financing). If financial capital plays an
important role in the profitability of small firms, it would be interesting to answer the
question on the relationship between profitability and different sources of financing (Fu
et al., 2002). In this paper, the authors measure external financing in terms of leverage
ratio (debt to equity, DE) and internal financing in terms of retained earning (RE). The
authors obtained financial information from the balance sheet of 160 trading firms in
VCCTO, Lao PDR. Both measures were computed annually for the 2002-2004 period.
Then the authors calculated the average value of those variables within three years.
5
Financial reports include balance sheet and income statement (loss and profit sheet)
Definition of SMEs in Lao PDR: number of employees from 5-19 define as small firm and from 20-99
define as medium-sized firm.
6
7
c. Moderated variables
Although financial capital plays an important role in profitability, the decision-making
processes for selecting the sources of financing are also important to the firms. Judging
from the previous studies, ownership types and management styles are the closest
relevant factors that are frequently used for investigating the impact on firm
performance (Kotey, 2005).
In this study, the authors define ownership types as family versus non-family-owned
business (FAM) and management styles (MS) are defined as owner-managed firm
versus outsider-managed firms. These two variables are moderated variables in order to
strengthen the relationship between the independent variable and dependent variable.
d. Control variables
Firm size (FS) and firm age (FA) are control variables. Variance in firm size and age
are controlled by including the log of the number of employees (LOGFS) and the
number of age (LOGFA). Firm size effects are controlled for this study due to the
results of previous studies which suggest that firm size is one important factor
influencing performance (Evans, 1987; Xayphone, 2006). Evans (1987) also argues that
the age of the firm may have profound influence on its ability to generate performance.
Thus to avoid the effect of these two variables, we control for firm size and age.
3.3 Analytical model
A hierarchical moderated regression was run for clarifying the main effects of corporate
financing and ownership types and management styles on performance, controlling for
size and age of firm.
The relationship between independent variables, moderated variables and dependent
variable is modelled in following equation:
Yi = b0 + b1X + b2Z + b3XZ + control variables +
where Yi represents average business performance composite index (BPCI), X
represents retained earning (RE) and debt to equity ratio (DE), Z represents moderated
variables included family versus non-family-owned business and owner-managed
versus outsider-managed firm, and the multiplicative factor represents the interaction
between RE and DE (X) and each of the moderated variables (Z). The control variables
included in the model are firm size (LOGFS) and age (LOGFA).
The details of the relationship between variables are illustrated in the equations below:
BPCI = b0 + b1RE + b2FAM + b3MS + b4LOGFS + b5LOGFA + b6RExFAM +
b7RExMS +
(2)
8
BPCI = b0 + b1DE + b2FAM + b3MS + b4LOGFS + b5LOGFA + b6DExFAM +
b7DExMS +
(3)
4. RESULTS
Table 1 provides descriptive statistics including product moment correlation (Pearson),
mean and standard deviations. The correlations among the independent, the moderator
and the dependent variables are not significant or very low; therefore moderator effects
should not be influenced unduly by multicollinearity. An analysis of the data confirmed
that none of the variables exceeded an acceptable threshold (10.00) and (1.5-2.5) for
variance inflation factors (VIF) and Durbin-Watson, respectively. They indicate that
there are no problems with multicollinearity that would violate assumptions for the
general linear model (Kanya, 2005).
Insert Table 1 near here.
Table 2 illustrates the moderated multiple regression results of the relationship between
retained earning, ownership types and management styles on the performance. The first
model indicates there are significant and positive effects for RE and the control
variable: LOGFA (p<0.001). The results of the second model indicate that the insertion
of interaction terms improves the amount of variance of explanatory power in
performance significantly (Adjusted R increases from 9 per cent to 40 per cent). More
specifically, there is significant interaction between retained earning and both
ownership types and management styles (p<0.05 and p<0.001, respectively). The
positive sign portrays that family-owned SMEs and owner-managed firms moderate the
relationship between retained earning and performance (BPCI), supporting H1 and H2.
Insert Table 2 near here.
Table 3 presents the results of the relationship between DE and ownership types and
management styles on the performance. The first model confirmed that there are
significant and positive effects on DE and LOGFA (p<0.001). The results of the second
model demonstrate that there is a significant relationship between the interaction terms
of debt to equity ratio and both ownership types and management styles on the
performance (p<0.001). The positive sign portrays that both family-owned business and
owner-managed firm are moderators to strengthen the relationship between debt to
equity ratio and performance of trading SMEs in VCC, Lao PDR. Therefore based on
these results, H3 and H4 are supported.
Insert Table 3 near here.
However, this paper did not find any statistically significant evidence that support the
direct relationship between ownership types, management styles and the performance
(see the results of model 1 in both table 2 and 3). Thus, this result is inconsistent with
9
numerous results of previous studies (for example Holl, 1975; McEachern, 1978). In
contrast, it seems to support the statement of Daily and Dalton (1992) and Daily and
Thomson (1994).
5. DISCUSSION AND CONCLUSIONS
The purpose of this paper is to extend the contingency theory of both ownership types
and management styles to the corporate financing of SMEs in a developing country,
particularly in the case of Lao PDR. Specifically, the contingency model hypothesises
that the relationship between a firm’s financial sources and performance depends on the
effects of ownership types and management styles. The overall results confirm that not
only both internal financing (retained earning, RE) and external financing (debt equity,
DE) are the main factors that influence the performance of trading SMEs in Lao PDR,
but that the moderating effects of ownership types and management styles also play a
critical role in strengthening the relationship between the corporate financing and
profitability of a firm. The interpretation of the results can explain that ownership types
and management styles are important factors which influence financing decisions. The
findings show that the profitability of family-owned businesses using retained earning
and debt as financial sources is higher than non-family-owned businesses doing the
same. In addition, owner-managed SMEs that are involved with retained earning and
debt have higher profitability than outsider-managed SMEs of the same.
The second model presented in Table 2 and Table 3 demonstrates that family-owned
businesses and owner-managed firms perform better in terms of using financial funds
(both internal and external funds) to influence profitability. To support this argument,
we observe the mean value of RE and DE of family-owned firms versus non-family
owned firms (see notes 7 & 8). Results confirm that family-owned firms have higher
retained earning 7 and lower debt to equity ratio 8 as compared with non-family
businesses. This means that family-owned businesses prefer internal financing more
than external financing. The main reasons are that family-owned businesses have
difficulty to access the financial market (bank) as suggested by a number of previous
studies9. Specifically, in the Lao SMEs context, the main problems of doing business
were a lack of financial resources and the difficulty in accessing sources of funds from
financial institutions, especially for small and family business (Dye & Webster, 1997;
GRID, 2004).
Furthermore, the mean value of RE and DE of owner-managed firms and outsidermanaged firms are compared (see notes 10 & 11) and demonstrate that firms managed
by owners have higher retained earning10 and debt to equity ratio 11 more than firms
7
The mean of retained earning of family-owned business is 24.12, while non-family business is only
1.02.
8
The mean of debt to equity ratio of family-owned business is 1.96, while non-family business is 2.15.
9
See the details in literature review.
10
Owner-managed firm has mean value of retained earning of 13.05 and outsider-managed firm has only
4.2.
10
managed by outsider managers. This means that owner-managers prefer to use both
internal and external financing for operating the businesses. The results of this study are
consistent with the “pecking order theory” whereby internally-generated sources of
finance will be preferred over external sources.
Generally speaking, the costs of debt financing are usually higher for family-owned
SMEs than for large firms due to the higher risk of small and family firms. Thus heavy
reliance on debt financing for capital needs may be negatively associated with
profitability for long-term operations. Even though the results confirm that the
interaction term of debt to equity ratio and family SMEs is significant and positive on
the profitability of the sample firms, this study deals with a short-term period12 which is
a limitation of the study. Therefore, further research should take the time factor into
account.
To sum up, this study provides SME owners/managers with some evidence on how to
maximise performance through financing decision-making while considering the
effects of ownership types and management styles. The findings suggest that when
considering the effects of ownership types and management styles, family-owned
businesses and owner-managed firms with higher retained earning perform better than
non-family businesses and outsider-managed firms, respectively, in terms of
profitability. Similarly, family-owned businesses and owner-managed firms with higher
debt to equity ratio perform better than non-family businesses and outsider-managed
firms, respectively, in terms of profitability. The explanatory power of the moderated
model is increased when compared to the restricted model (the model without
moderator variables). Therefore, differences in the moderating effects of financial
resources among SMEs could be attributed to the differences in performance.
Implications
There are two main practical implications associated with this study. First, for
owners/managers of family-owned businesses and owner-managed firms, it is
important to prioritise financial decision making to utilise retained earning as a source
of funds in investment and business expansion. Specifically, this study underscores the
need for owners/managers to be aware that family-owned businesses and ownermanaged firms are smaller than non-family owned business and outsider-managed
firms, respectively. In fact, acquiring external sources of funds such as borrowing from
commercial banks or other financial institutions is costly for small corporations.
The second practical implication of this study is that SMEs involved in high debt to
equity ratio should be careful of the consequences in their long-term performance. In
the short term, SMEs with higher debt to equity ratio enjoy higher profitability as recent
research has confirmed. On the contrary in the long-term, SMEs have to reimburse a
certain amount of loans and interests to the commercial banks or other financial
11
Owner-managed firm has mean value of debt to equity of 2.46 and outsider-managed firm has only
1.53.
12
From 2002-2004
11
institutions. Hence, this would affect long-term profitability. Thus owners/managers of
SMEs should avoid of using loans that are mismatched with the investment projects
(for instance, short-term loans should be allocated only to short-term goals. In contrast,
long term loans should be allocated to long term investment).
REFERENCES
Ballantine, J.W., Cleveland, F.W. and Koeller, C.T., 1993. Profitability, uncertainty and
firm size. Small Business Economics, Vol. 5, No. 2, June, pp. 87-100.
Berger, A.N. and Udell, G.F., 1998. The economics of small business finance: The role
of private equity and debt markets in the financial growth cycle. Journal of Banking
and Finance, Vol. 22, No. 6, August, pp. 613-673.
Burns, P. and Dewhurst, J., 1996. Small Business and Entrepreneurship, London:
McMillan Business.
Bushong, J.G., 1995. Accounting and Auditing of Small Business, New York: Garland.
Chua, J.H., Chrisman, J.J. and Chang, E., 2004. Are family firms born or made? An
exploratory investigation. Family Business Review, Vol. 17, No. 1, pp. 37-55.
Chittenden, F., Hall, G. and Hutchinon, P., 1996. Small firm growth, access to capital
markets and financial structure: Review of issues and an empirical investigation.
Small Business Economics, Vol. 8, No. 1, February, pp. 59-67.
Daily, C.M. and Dalton, D.R., 1992. Financial performance of founder-managed versus
professionally managed small corporations. Journal of Small Business Management,
Vol. 30, No. 2, April, pp. 25-34.
Daily, C.M. and Dollinger, M.J., 1993. Alternative methodologies for identifying
family vs. non-family managed businesses. Journal of Small Business Management,
Vol. 31, No. 2, April, pp. 79-90.
Daily, C.M. and Thompson, S.S., 1994. Ownership structure, strategy posture and firm
growth: An empirical examination. Family Business Review, Vol. 7, No. 3, pp. 23749.
Donckels, R. and Frohlich, E., 1991. Are family businesses really different? European
experiences from STRATOS. Family Business Review, Vol. 4, No. 2, pp. 149-60.
Dreux, D.R., 1990. Financing family business: Alternatives to selling out or going
public. Family Business Review, Vol. 3, No. 3, pp. 225-43.
12
Dye, P. and Webster, L., 1997. Survey of Medium and Large Private Companies in the
Lao PDR [online]. Available on Mekong Project Development Facility (MPDF)
website: http://www.mpdf.org/e-publication s/el-psd-paper.jsp [Accessed 10 March
2006].
Evans, D., 1987. The relationship between firm growth, size and age: Estimates for 100
manufacturing industries. Journal of Industrial Economics, Vo. 35, No. 4, June, pp.
567-82.
Fu, T.W., Ke, M.C. and Huang, Y.S., 2002. Capital growth, financing source and
profitability of small businesses: Evidence from Taiwan small enterprises. Small
Business Economics, Vol. 18, No. 4, June, pp. 257-67.
Graham, J.R., 2000. How big are the tax benefits of debt? The Journal of Finance, Vol.
55, No. 5, October, pp. 1901-41.
Gallo, M.A. and Vilaseca, A., 1996. Finance in family business. Family Business
Review, Vol. 9, No. 4, pp. 387-401.
Gersick, K.E., David, J.A., McCollom-Hampton, M. and Lansberg, I., 1997.
Generation
to Generation, Boston MA: Harvard Business School Press.
GRID, 2004. Gender issues in micro and small enterprises in the Lao PDR.
International
Labour
Organisation
[online].
Available
at:
http://www.gridlwu.org/docs/ [Accessed 10 March 2006].
Haper, M. and Soon, T.T., 1979. Small Enterprise in Developing Countries: Case
Studies and Conclusion. London: Intermediate Technology Publications.
Harris, R.I.D., Reid, R.S. and McAdam, R., 2004. Employee involvement in family and
non-family owned businesses in Great Britain. International Journal of
Entrepreneurial Behaviour & Research, Vol. 10 Nos. 1/2, pp. 49-58.
Harvey, M. and Evans, R., 1995. Forgotten sources of capital for the family-owned
business. Family Business Review, Vol. 8, No. 3, pp. 159-75.
Hashim, Mohd Khairuddin, 2000. Business strategy and performance in Malaysian
SMEs: A recent survey”, Malaysian Management Review, Vol. 35, No. 2,
December, pp. 1-10.
Holl, P., 1975. Effects of control type on the performance of the firm in the U.K.
Journal of Industrial Economics, Vol. 23, No. 4, pp. 275-71.
Holz, C.A., 2002. The impact of the liability-asset ratio on profitability in China’s
industrial state-owned enterprises. China Economic Review, Vol. 13, No. 1, pp.1-26.
13
Holmes, S., Hutchison, P., Forsaith, D., Gibson, B. and McMahon, R., 2003. Small
Enterprise Finance, Brisbane: Wiley.
Hovakimian, A., Hovakimian, G. and Tehranian, H., 2004. Determinants of target
Capital structure: The case of dual debt and equity issues. Journal of Financial
Economics, Vol. 71, No. 3, pp. 517-40.
Hutchinson, R.W., 1995. The capital structure and investment decision of the small
owner-managed firm: Some exploratory issues. Small Business Economics, Vol.7,
No. 3, June, pp. 231-39.
Hughes, A., 1997. Finance for SMEs: A U.K. perspective. Small Business Economics,
Vol. 9, No. 2, April, pp. 151-66.
Jensen, M.C., 1986. Agency costs of free cash flow, corporate finance and takeovers.
American Economic Review, Vol. 76, No. 2, May, pp. 323-28.
Jordan, J., Lowe, J. and Taylor, P., 1998. Strategy and financial policy in UK small
firms. Journal of Business Finance and Accounting, Vol. 25, No. 1 & 2,
January/March, pp. 1-27.
Kanya, W., 2005. SPSS for Windows for Data Analysis, Bangkok: Chulalongkorn
University.
Kole, S., 1997. The complexity of compensation contract. Journal of Financial
Economics, Vol. 43, No. 1, January, pp. 79-104.
Kotey, B. and Slade, P., 2005. Formal human resource management practices in small,
growing firms. Journal of Small Business Management, Vol. 43, No. 1, January, pp.
16-40.
Lee, J., 1988. A comparative study of the relationship between strategy and business
performance: Industrialized countries and newly industrializing countries.
Published Ph.D Dissertation, University of Mississippi.
Neubauer, F. and Lank, A. G., 1998. The Family Business: Its Governance for
Sustainability. London: Macmillan Press.
McConaughy, D.L., 1999. Is the cost of capital different for family firms? Family
Business Review, Vol. 12, No. 4, pp. 353-60.
McConnell, J.J. and Servaes, H., 1995. Equity ownership and the two faces of debt.
Journal of Financial Economics, Vol. 39, pp. 131-57.
McEchern, W., 1978. Corporate control and growth: An alternative approach. Journal
of Industrial Economics, Vol. 26, No. 3, March, pp. 257-66.
14
Sonnenfeld, J.A. and Spence, P.L., 1989. The parting patriarch of a family firm.
Family Business Review, Vol. 2, No. 4, pp. 355-75.
Souphanh, K. and Mohamed, Ariff, 2003. Development Efforts in the Lao Economy:
Policy Pointers from the Malaysian Experience. Kuala Lumpur: Malaysian Institute
of Economic Research.
Storey, D.J., 1994. Understanding the Small Business Sector. London: Routledge.
Xayphone, K., 2006. Business traits, strategy and the performance of SMEs: An
empirical analysis of Lao trading sector. Unpublished Master Thesis, Hiroshima
University.
TABLE 1: Descriptive Statistics and Correlation Matrix
Variables
Mean S.D.
1
(1) BPCI
(2) RE
(3) DE
(4) FAM
(5) MS
(6) LOGFS
(7) LOGFA
61.94
9.35
2.07
0.41
0.58
0.99
0.78
0.26**
0.39** -0.02
-0.08 0.11 -0.00
-0.00 0.04 0.03 0.11
0.12
0.06 0.05 -0.11 -0.03
0.23** 0.08 -0.00 -0.06 -0.18 0.23** -
139.54
109.85
12.10
0.49
0.49
0.29
0.24
2
3
4
5
6
7
*, ** and *** statistically significant at 10%, 5% and 1% respectively
15
TABLE 2: Hierarchical Moderated Regression Analysis of Firm’s Performance
(in the case of retained earning, is an independent variable)
Models
Independent variables
RE
FAM
MS
LOGFS
LOGFA
RExFAM
RExMS
R2
Adjusted R2
df
Durbin-Watson
VIF
Model 1
Model 2
Model 1
Model 2
0.31***
-26.35
10.95
24.40
114.39***
0.14
-42.96**
-50.24***
23.89
26.83
15.09**
21.18***
0.42
0.40
159
2.10
1.02
1.04
1.05
1.07
1.10
1.24
1.66
1.22
1.10
1.21
2.08
1.31
0.12
0.09
159
2.19
*, ** and *** statistically significant at 10%, 5% and 1% respectively
TABLE 3: Hierarchical Moderated Regression Analysis of Firm’s Performance
(in the case of debt to equity ratio, is an independent variable)
Models
Independent variables
DE
FAM
MS
LOGFS
LOGFA
DExFAM
DExMS
R2
Adjusted R2
df
Durbin-Watson
VIF
Model 1
Model 2
Model 1
Model 2
4.46***
-17.09
9.96
21.78
127.62***
2.7***
-46.74**
-44.96**
24.42
35.31
18.63***
18.62***
0.46
0.44
159
2.16
1.00
1.02
1.05
1.07
1.09
1.09
1.62
1.23
1.09
1.22
1.76
1.41
0.21
0.19
159
2.29
*, ** and *** statistically significant at 10%, 5% and 1% respectively
16