DETERMINANTS OF INTERNAL FINANCING: SMALL AND MEDIUM ENTERPRISES IN PAKISTAN

Abstract

Purpose- Internal financing is an indicator of self-reliance, growth, and survival of a firm without help from external sources. It assesses the growth and survival of a firm without raising capital in equity or debt markets. This study identifies the determinants of internal financing. Methodology- The study is based on six years of data from 398 companies in Pakistan, while panel least square (PLS) techniques have been applied to estimate the parameters. The conclusions have been derived through 12 mathematical equations Findings- This study provides a device to assess the appropriate level of internal equities. From an investment policy point of view, lower return on investment discourages investment in small and medium enterprises. Conclusion- The lower return on investment discourages investors from investing in small and medium enterprises. To compensate this effect, the study suggests the intervention by monetary and fiscal policy for the survival of small and medium enterprises (SMEs).

Keywords

• Dividend
• intangible assets
• leverage financing
• Pakistan
• SMEs

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