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Comparing Financial Debt Choices of Existing and New SMEs in Indian Manufacturing Sector

Author

Listed:
  • KG Suresh

    (ICFAI Business School (IBS))

  • Akanksha Saxena

    (Indian Institute of Management (IIM))

  • M. Srikanth

    (National Institute of Rural Development & Panchayati Raj)

Abstract

The study examines the differences in financial debt choices of SME and Non-SME firms in India. Being SMEs, firms enjoy special grants and packages that non-SMEs firms do not, and very often, the SMEs do not want to let go of the SME status. This brings in the information asymmetry and agency problem among the market participants and this may result in differences in the debt choices of the firms. We found that the existing SMEs use more unsecured debt, the newly added SMEs use more long-term debt and secured debt reflecting firm-specific growth opportunities. This shows the difference in capital structure decisions of SMEs operated under different policy environments sourced because of the conflict of interests among the participants.

Suggested Citation

  • KG Suresh & Akanksha Saxena & M. Srikanth, 2023. "Comparing Financial Debt Choices of Existing and New SMEs in Indian Manufacturing Sector," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(3), pages 445-456, September.
    • Handle: RePEc:kap:apfinm:v:30:y:2023:i:3:d:10.1007_s10690-022-09382-8
    DOI: 10.1007/s10690-022-09382-8
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