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October 25, 2023Studies in Economics and Finance

Investment decisions and small and medium-sized enterprise indebtedness: Heckman’s two-stage approach

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Authors

AQArgjentë QerimiBKBesni̇k A. KrasniqiDBDriton Balaj

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Overview

Econometric analysis reveals higher bank debt uptake for new investments among incorporated small enterprises with educated managers, indicating reliance on external credit for firm growth.

Key Points

  • To evaluate how small and medium-sized enterprise capital structure choices and bank leverage interact with decisions to pursue new capital investments.
  • Applied Heckman's two-step econometric modelling to control for sample selection bias in capital structure choices.
  • Evaluated a sample of small and medium-sized enterprises in Kosovo, using firm growth aspirations as an instrumental variable.
  • Larger enterprises exhibiting growth aspirations are significantly more likely to initiate new investments.
  • Among investing firms, entities with highly educated managers and limited liability status rely more heavily on bank debt rather than internal cash flows relative to smaller or individually owned firms.

Cite This Study

Qerimi et al. (2023) studied this question.

synapsesocial.com/papers/6a19c6de196cd56b09eab3a1https://doi.org/10.1108/sef-06-2023-0331
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