IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v6y2022i1p166-179.html
   My bibliography  Save this article

A Study Between the Association of Financial Management Practices and Performance of Small and Medium Enterprises (SMEs) Background: A Working Paper

Author

Listed:
  • L. Sooriyakumaran

    (Advanced Technological Institute, SLIATE, 320, T B Jayah Mawatha, Colombo, Sri Lanka)

  • Dr. S. S. Thrikawala

    (Waikato Institute of Technology, New Zealand)

  • C. Pathirawasam

    (Professor, Department of Commerce & FM3, University of Kelaniya, Sri Lanka)

Abstract

The purpose of the study was to identify the factors of financial management practices in SMEs background and to examine whether they impact on business performance of SMEs. A literature survey was carried out, and expert consultation was employed to develop this working paper. With the help of the literature survey and experts’ consultation, the association between financial management practices (FMP) and business performance (BP) was investigated. Accordingly, there were six indicators of financial management practices were identified in the literature namely; maintaining accounting records (MAR), financial reporting preparation and analysis (FRPA), accounting information system (AIS), working capital management (WCM), investment decision (ID) and financing (FIN). In addition, dependent variable of business performance. The literature evidenced that there are associations between FMP and BP in the SMEs. This includes positive, negative and no significant correlations or impact among variables of SMEs contributors. Accordingly, this study suggested a conceptual model for testing six hypotheses to examine the association between FMP and BP. Further, this study recommends an empirical study through explorative factor analysis and confirmatory factor analysis to develop valid and reliable instruments to measure the FMP in the SMEs context. A path model was suggested to examine whether FMP influences BP in the SMEs background and further identify the moderating effect of demographic factors of gender and education level of financial management practitioners and business age of SMEs.

Suggested Citation

  • L. Sooriyakumaran & Dr. S. S. Thrikawala & C. Pathirawasam, 2022. "A Study Between the Association of Financial Management Practices and Performance of Small and Medium Enterprises (SMEs) Background: A Working Paper," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(1), pages 166-179, January.
    • Handle: RePEc:bcp:journl:v:6:y:2022:i:1:p:166-179
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-6-issue-1/166-179.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/a-study-between-the-association-of-financial-management-practices-and-performance-of-small-and-medium-enterprises-smes-background-a-working-paper/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carien van Mourik, 2014. "The Equity Theories and the IASB Conceptual Framework," Accounting in Europe, Taylor & Francis Journals, vol. 11(2), pages 219-233, December.
    2. Charles Ezeagba, 2017. "Financial Reporting in Small and Medium Enterprises (SMEs) in Nigeria. Challenges and Options," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(1), pages 1-10, January.
    3. Butt, Babar Zaheer & Hunjra, Ahmed Imran & Rehman, Kashif-Ur-, 2010. "Financial management practices and their impact on organizational performance," MPRA Paper 32685, University Library of Munich, Germany.
    4. John O. Okpara, 2011. "Factors constraining the growth and survival of SMEs in Nigeria," Management Research Review, Emerald Group Publishing Limited, vol. 34(2), pages 156-171, January.
    5. Laura A. Orobia & Warren Byabashaija & John C. Munene & Samuel K. Sejjaaka & Dan Musinguzi, 2013. "How do small business owners manage working capital in an emerging economy?," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 10(2), pages 127-143, June.
    6. Masato Abe & Michael Troilo & Orgil Batsaikhan, 2015. "Financing small and medium enterprises in Asia and the Pacific," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 4(1), pages 2-32, April.
    7. Onaolapo Adekunle Abdul-Rahamon & Adegbite Tajudeen Adejare, 2014. "The Analysis of the impact of Accounting Records Keeping on the Performance of the Small Scale Enterprises," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(1), pages 1-17, January.
    8. Robert Blackburn & Peter Carey & George Tanewski, 2018. "Business advice by accountants to SMEs: relationships and trust," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 15(3), pages 358-384, April.
    9. repec:eme:mfppss:v:42:y:2016:i:7:p:706-721 is not listed on IDEAS
    10. Zwiebel, Jeffrey, 1996. "Dynamic Capital Structure under Managerial Entrenchment," American Economic Review, American Economic Association, vol. 86(5), pages 1197-1215, December.
    11. Teerachai Arunruangsirilert & Supasith Chonglerttham, 2017. "Effect of corporate governance characteristics on strategic management accounting in Thailand," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 25(1), pages 85-105, February.
    12. Saqib Muneer & Rao Abrar Ahmad & Azhar Ali, 2017. "Impact of Financial Management Practices on SMEs Profitability with Moderating Role of Agency Cost," Information Management and Business Review, AMH International, vol. 9(1), pages 23-30.
    13. Lawrence Collins Kihamaiso Mwebesa & Catherine Kansiime & Benon B. Asiimwe & Paddy Mugambe & Innocent B. Rwego, 2018. "The Effect of Financial Record Keeping on Financial Performance of Development Groups in Rural Areas of Western Uganda," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(4), pages 136-145, April.
    14. Jianmu Ye & KMMCB Kulathunga, 2019. "How Does Financial Literacy Promote Sustainability in SMEs? A Developing Country Perspective," Sustainability, MDPI, vol. 11(10), pages 1-21, May.
    15. Selvanayaki, S. & Sivakumar, S.D. & Rohini, A. & Mani, K., 2016. "Financial Management Practices and Profitability of Modern Rice Milling Firms in Kangayam Cluster, Tamil Nadu," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 29(2).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Obi Berko Obeng Damoah & Augustine Awuah Peprah, 2021. "Synthesis of small and medium enterprise research in Ghana," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 11(1), pages 451-468, December.
    2. Qaiser Abbas & Riaz Ahmed & Muhammed Asif & Abid Mehmood, 2022. "The Impact of Investment Decisions on Firm Profitability of Non-Financial Sectors in Pakistan: Mediating Role of Sales Growth," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 4(4), pages 527-543, December.
    3. Ganlin Pu & Md. Qamruzzaman & Ahmed Muneeb Mehta & Farah Naz Naqvi & Salma Karim, 2021. "Innovative Finance, Technological Adaptation and SMEs Sustainability: The Mediating Role of Government Support during COVID-19 Pandemic," Sustainability, MDPI, vol. 13(16), pages 1-27, August.
    4. Fidrmuc, Jana P. & Jacob, Marcus, 2010. "Culture, agency costs, and dividends," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 321-339, September.
    5. Nancy Neoyame Chabaefe & Abubaker Qutieshat, 2024. "Financial Literacy, Financial Education and Financial Experience: Conceptual Framework," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 44-55, July.
    6. Alfons J. Weichenrieder & Tina Klautke & Alfons Weichenrieder, 2008. "Taxes and the Efficiency Costs of Capital Distortions," CESifo Working Paper Series 2431, CESifo.
    7. González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María Andréa, 2012. "Family involvement and dividend policy in listed and non-listed firms," Galeras. Working Papers Series 034, Universidad de Los Andes. Facultad de Administración. School of Management.
    8. Ing-Haw Cheng & Harrison Hong & Kelly Shue, 2013. "Do Managers Do Good with Other People's Money?," NBER Working Papers 19432, National Bureau of Economic Research, Inc.
    9. Chang, Ya-Kai & Chou, Robin K. & Huang, Tai-Hsin, 2014. "Corporate governance and the dynamics of capital structure: New evidence," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 374-385.
    10. Tse-Chun Lin & Qi Liu & Bo Sun, 2015. "Contracting with Feedback," International Finance Discussion Papers 1143, Board of Governors of the Federal Reserve System (U.S.).
    11. Brennan, Michael J. & Kraft, Holger, 2016. "Leaning against the wind: Debt financing in the face of adversity," SAFE Working Paper Series 119, Leibniz Institute for Financial Research SAFE, revised 2016.
    12. Couzoff, Panagiotis & Banerjee, Shantanu & Pawlina, Grzegorz, 2022. "Effectiveness of monitoring, managerial entrenchment, and corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 77(C).
    13. de Jong, A., 1999. "An empirical analysis of capital structure decisions in Dutch firms," Other publications TiSEM b9498b3e-2937-4e4c-b951-a, Tilburg University, School of Economics and Management.
    14. Al-Shaer, Habiba & Uyar, Ali & Kuzey, Cemil & Karaman, Abdullah S., 2023. "Do shareholders punish or reward excessive CSR engagement? Moderating effect of cash flow and firm growth," International Review of Financial Analysis, Elsevier, vol. 88(C).
    15. Morellec, Erwan & Zhdanov, Alexei, 2008. "Financing and takeovers," Journal of Financial Economics, Elsevier, vol. 87(3), pages 556-581, March.
    16. Donaldson, Jason & Piacentino, Giorgia & Malenko, Nadya, 2017. "Deadlock on the Board," CEPR Discussion Papers 12503, C.E.P.R. Discussion Papers.
    17. Henrik Cronqvist & Fredrik Heyman & Mattias Nilsson & Helena Svaleryd & Jonas Vlachos, 2009. "Do Entrenched Managers Pay Their Workers More?," Journal of Finance, American Finance Association, vol. 64(1), pages 309-339, February.
    18. Ana Venâncio & João Jorge, 2022. "The role of accelerator programmes on the capital structure of start-ups," Small Business Economics, Springer, vol. 59(3), pages 1143-1167, October.
    19. de Jong, A., 2001. "The Disciplining Role of Leverage in Dutch Firms," Discussion Paper 2001-48, Tilburg University, Center for Economic Research.
    20. Timothy J. Brailsford & Barry R. Oliver & Sandra L. H. Pua, 2002. "On the relation between ownership structure and capital structure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 42(1), pages 1-26, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:6:y:2022:i:1:p:166-179. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.