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

Al-Najjar, Basil and Al-Najjar, Dana (2017) The impact of external financing on firm value and a corporate governance index: SME evidence. Journal of Small Business and Enterprise Development, 24 (2). pp. 411-423. ISSN 1462-6004

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Official URL: https://doi.org/10.1108/JSBED-11-2016-0172

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.

Item Type: Article
Uncontrolled Keywords: Corporate governance index, External financing needs, SMEs, UK
Subjects: N100 Business studies
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School
Depositing User: Elena Carlaw
Date Deposited: 27 Apr 2021 15:55
Last Modified: 31 May 2021 14:39
URI: http://nrl.northumbria.ac.uk/id/eprint/46036

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