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Entrepreneurs and funding decisions: evidence from Australian SMEs

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  • Jason R. Fitzsimmons
  • Evan J. Douglas

Abstract

This paper investigates the decision by Small and Medium Enterprises (SMEs) to raise funding via the sale of equity. Prior theoretical and empirical work on the 'pecking order' of funding has indicated that we should not expect SMEs to prefer equity funding over internal funding and external debt, except under particular circumstances relating to the risk aversion and autonomy aversion of the owner-manager. We utilise data from the Business Longitudinal Survey undertaken by the Australian Bureau of Statistics to investigate relationships suggested by the literature. We found that only about 5% of SMEs intended to raise funds from the sale of equity. Of these, the decision to seek equity funding was significantly and positively related to the owner-manager's intention to sell the firm; to the firm's intention to increase the number of markets targeted; and to the firm's growth intentions. The decision was also negatively related to the firm being a family business.

Suggested Citation

  • Jason R. Fitzsimmons & Evan J. Douglas, 2006. "Entrepreneurs and funding decisions: evidence from Australian SMEs," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 3(1), pages 76-91.
    • Handle: RePEc:ids:ijesbu:v:3:y:2006:i:1:p:76-91
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    Cited by:

    1. Brian Lucey & Colm KEarney & Ciaran MacAnBhaird, 2012. "Culture and capital structure in small and medium sized firms," The Institute for International Integration Studies Discussion Paper Series iiisdp419, IIIS.
    2. Mariano Puglisi & Vincenzo Fasone & Giulio Pedrini & Deborah Gervasi & Guglielmo Faldetta, 2022. "Using a dual system of reasoning in small businesses: Entrepreneurial decisions and subjective risk intelligence," International Entrepreneurship and Management Journal, Springer, vol. 18(2), pages 529-553, June.

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