SMEs’ Access to Finance and Choice of Capital Structure in Turkey

Year 2019, Volume: 19 Issue: 2, 277 - 291, 30.04.2019

Seyid Mahmud , Tarik Akin

https://doi.org/10.21121/eab.521579

Cited By: 4

Abstract

The paper
analyzes behavior of SMEs in financing their working and fixed capital
requirements. The cross-sectional sample employed in this paper is based on the
comprehensive World Bank Enterprise Survey (WBES) database. Seemingly unrelated
regression (SUR) method has been employed to estimate two separate models for
working capital and fixed capital, respectively. The model(s) not only focuses
on the behavior of SMEs but also analyzes the behavior of SMEs reporting
‘access to finance’ as a major impediment in their growth in the survey. The
regression results indicate that SMEs in Turkey, despite reporting problems in
accessing finance are more dependent on bank financing for working capital. The
result is in contrast to the full sample findings where similar SMEs depend
less on bank financing and more on internal funds. The result may suggest
dominant role of Turkish banking sector compared to the sample at large and
policies to support bank financing for the SMEs in Turkey. Furthermore, the
results for fixed capital financing for the overall sample shows higher
dependence on non-banking modes of finance, supporting the conclusion that
equity market(s) may offer viable solution in addressing the fixed capital
financing constraints.

Keywords

access to finance, , SME finance, , Seemingly Unrelated Regresion

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