SMEs fintech financing: does board governance matter?
Keywords:
Fintech Financing, Apply Finance, CEO Duality, Board structure
Abstract
The purpose of this study is to examine the board governance factors that influence a small and medium enterprise’s (SME’s) decision toward fintech financing. A structured questionnaire survey of 90 Malaysian SMEs was used and the data analyzed using the Heckman selection model and the marginal effect model. The results demonstrate that SMEs’ female board members, family board members, and the duality of their CEOs have a significant influence on their decision to obtain financing from fintech platforms. Professional services provided by experts have a negative influence on their decisions to engage in fintech financing. The SMEs’ board size, the length of their chairmen’s service, and non-family board members are negatively related to their decisions to apply for financing. The more male members that were on the board, the more likely the SME was to choose to apply for external financing during the survey year.
References
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Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of financial economics, 94(2), 291-309.
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Ahern, K. R., & Dittmar, A. K. (2012). The changing of the boards: The impact on firm valuation of mandated female board representation. The quarterly journal of economics, 127(1), 137-197.
Akther, R. (2022). Factors associated with small and medium enterprise financing: a study from Bangladesh. Journal of Global Entrepreneurship Research, 12, 265 - 277.
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Alves, P., Couto, E. B., & Francisco, P. M. (2015). Board of directors’ composition and capital structure. Research in International Business and Finance, 35, 1-32.
Ampenberger, M., Schmid, T., Achleitner, A. K., &Kaserer, C. (2013). Capital structure decisions in family firms: empirical evidence from a bank-based economy. Review of Managerial Science, 7(3), 247-275.
Anandasayanan, S., &Velnampy, T. (2018). Corporate Governance and Corporate Profitability of Listed Diversified Holding Companies in Sri Lanka. International Journal of Accounting and Financial Reporting, 8(1), 294-304.
Anderson, R. C., Mansi, S. A., &Reeb, D. M. (2003). Founding family ownership and the agency cost of debt. Journal of Financial economics, 68(2), 263-285.
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Croci, E., Doukas, J. A., &Gonenc, H. (2011). Family control and financing decisions. European Financial Management, 17(5), 860-897.
Dasilas, A., &Papasyriopoulos, N. (2015). Corporate governance, credit ratings and the capital structure of Greek SME and large listed firms. Small Business Economics, 45(1), 215-244.
Datta, S., Doan, T., & Toscano, F. (2021). Top executive gender, board gender diversity, and financing decisions: Evidence from debt structure choice. Journal of Banking & Finance, 125, 106070.
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Degryse, H., Matthews, K., & Zhao, T. (2017). Relationship banking and regional SME financing: the case of Wales. International Journal of Banking, Accounting and Finance, 8(1), 93-118.
Djan, G. O., Zehou, S., &Bawuah, J. (2017). Board gender diversity and dividend policy in SMEs: Moderating role of capital structure in emerging market. Journal of Research in Business, Economics and Management, 9(2), 1667-1676.
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Carter, D. A., D'Souza, F., Simkins, B. J., & Simpson, W. G. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance: An International Review, 18(5), 396-414.
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Chebukhanova, L., & Blokhina, T. (2020). Problems of Alternative Financing For Innovative SME in Russia. Proceedings of INTCESS 2020- 7th International Conference on Education and Social Sciences 20-22 January, 2020 - DUBAI (UAE)
Chou, F.Y. and Wang, B.C., (2009). The innovation and learning system for small and medium enterprises: a governance perspective. International Journal of Business Research, 9(5): 76-86.
Clougherty, J. A., Duso, T., & Muck, J. (2016). Correcting for self-selection based endogeneity in management research: Review, recommendations and simulations. Organizational Research Methods, 19(2), 286-347.
Constantinidis, C., Cornet, A., &Asandei, S. (2006). Financing of women-owned ventures: The impact of gender and other owner-and firm-related variables. Venture capital, 8(02), 133-157.
Cornelli, G., Davidson, V., & Frost, J. (2019). SME Finance in Asia: Recent Innovations in Fintech Credit, Trade Finance, and Beyond.ADBI Working Paper Series.
Croci, E., Doukas, J. A., &Gonenc, H. (2011). Family control and financing decisions. European Financial Management, 17(5), 860-897.
Dasilas, A., &Papasyriopoulos, N. (2015). Corporate governance, credit ratings and the capital structure of Greek SME and large listed firms. Small Business Economics, 45(1), 215-244.
Datta, S., Doan, T., & Toscano, F. (2021). Top executive gender, board gender diversity, and financing decisions: Evidence from debt structure choice. Journal of Banking & Finance, 125, 106070.
Delić, A., Oberman Peterka, S., &Kurtović, I. (2016). Is there a relationship between financial literacy, capital structure and competitiveness of SMEs?. Ekonomskivjesnik: Review of Contemporary Entrepreneurship, Business, and Economic Issues, 29(1), 37-50.
Degryse, H., Matthews, K., & Zhao, T. (2017). Relationship banking and regional SME financing: the case of Wales. International Journal of Banking, Accounting and Finance, 8(1), 93-118.
Djan, G. O., Zehou, S., &Bawuah, J. (2017). Board gender diversity and dividend policy in SMEs: Moderating role of capital structure in emerging market. Journal of Research in Business, Economics and Management, 9(2), 1667-1676.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.
Faccio, M., Marchica, M. T., & Mura, R. (2016). CEO gender, corporate risk-taking, and the efficiency of capital allocation. Journal of corporate finance, 39, 193-209.
Gabrielsson, J., &Winlund, H. (2000). Boards of directors in small and medium-sized industrial firms: examining the effects of the board's working style on board task performance. Entrepreneurship & Regional Development, 12(4), 311-330.
Gabrielsson, J. (2007). Correlates of board empowerment in small companies. Entrepreneurship Theory and Practice, 31(5), 687-711.
Ganiyu, Y. O., & Abiodun, B. Y. (2012). The impact of corporate governance on capital structure decision of Nigerian firms. Research Journal in Organizational Psychology & Educational Studies, 1(2), 121-128.
Gkliatis, I. (2009). Boards of directors and financial Performance: A combination of agency and dependence theory perspectives. In BBS Doctoral Symposium.
Gill, A., Biger, N., Mand, H. S., & Shah, C. (2012). Corporate governance and capital structure of small business service firms in India. International Journal of Economics and Finance, 4(8), 83.
Gottardo, P., &Moisello, A. M. (2014). The capital structure choices of family firms. Managerial Finance.
Green, C. P., &Homroy, S. (2018). Female directors, board committees and firm performance. European Economic Review, 102, 19-38.
Hamad, S. B., & Karoui, A. (2011). The SMEs governance mechanisms practices and financial performance: Case of Tunisian industrial SMEs. International Journal of Business and Management, 6(7), 216.
Halevi, M. Y., Carmeli, A., &Brueller, N. N. (2015). Ambidexterity in SBUs: TMT behavioral integration and environmental dynamism. Human Resource Management, 54(S1), 223-238.
Hart, O. (1995). Corporate governance: some theory and implications. The economic journal, 105(430), 678-689.
Heng, T. B., Azrbaijani, S., & San, O. T. (2012). Board of directors and capital structure: Evidence from leading Malaysian companies. Asian Social Science, 8(3), 123-136.
Hu, Z., Ding, S., Li, S., Chen, L., & Yang, S. (2019). Adoption intention of FinTech services for bank users: An empirical examination with an extended Technology Acceptance Model. Symmetry, 11(3), 340.
Ivashchenko, A., Britchenko, I., Dyba, M., Polishchuk, Y., Sybirianska, Y., &Vasylyshen, Y. (2018). Fintech platforms in SME’s financing: EU experience and ways of their application in Ukraine, 14(3), 83-96.
Jagtiani, J., & Lemieux, C. (2018). Do fintech lenders penetrate areas that are underserved by traditional banks? Journal of Economics and Business, 100, 43–54.
Jaskiewicz, P., & Klein, S. (2007). The impact of goal alignment on board composition and board size in family businesses. Journal of Business research, 60(10), 1080-1089.
Johannisson, B., &Huse, M. (2000). Recruiting outside board members in the small family business: An ideological challenge. Entrepreneurship & Regional Development, 12(4), 353-378.
Kaczmarek, S., Kimino, S., & Pye, A. (2012). Board task‐related faultlines and firm performance: A decade of evidence. Corporate Governance: An International Review, 20(4), 337-351.
Khan, M. A., Siddique, A., Sarwar, Z., Minh Huong, L. T., & Nadeem, Q. (2020). Determinants of entrepreneurial small and medium enterprises performance with the interaction effect of commercial loans. Asia Pacific Journal of Innovation and Entrepreneurship, 14(2), 161-173.
Kuo, H. C., Wang, L. H., & Liu, H. (2012). Corporate governance and capital structure: Evidence from Taiwan SMEs. Review of Economics and Finance, 2, 43-58.
Le Breton–Miller, I., & Miller, D. (2006). Why do some family businesses out–compete? Governance, long–term orientations, and sustainable capability. Entrepreneurship theory and practice, 30(6), 731-746.
Lussuamo, J. M., &Serrasqueiro, Z. (2020). Restrictions on access to bank finance for SMEs in Cabinda–Angola. Small Enterprise Research, 27(3), 275-288.
Lybaert, N. (1998). The information use in a SME: its importance and some elements of influence. Small business economics, 10(2), 171-191.
Mac an Bhaird, C., & Lucey, B. (2010). Determinants of capital structure in Irish SMEs. Small business economics, 35(3), 357-375.
Miller, T., & del Carmen Triana, M. (2009). Demographic diversity in the boardroom: Mediators of the board diversity–firm performance relationship. Journal of Management studies, 46(5), 755-786.
Mishra, C. S., & McConaughy, D. L. (1999). Founding family control and capital structure: The risk of loss of control and the aversion to debt. Entrepreneurship theory and practice, 23(4), 53-64.
Musteen, M., Barker III, V. L., &Baeten, V. L. (2006). CEO attributes associated with attitude toward change: The direct and moderating effects of CEO tenure. Journal of Business Research, 59(5), 604-612.
Na, K., Lee, Y., & Yu, H. (2023). CEO type and earnings management to avoid loss or earnings decreases: Evidence from South Korea. Gadjah Mada International Journal of Business, 25(2), 227-254.
Nazir, M. S., & Javaid, A. (2018). Corporate Governance on Financing Policy: Mediating Role of Cost of Capital. ToKnowPress.
Pasaribu, P. (2017). Female directors and firm performance: Evidence from UK listed firms. Gadjah Mada International Journal of Business, 19(2), 145-166.
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Published
2024-05-02
How to Cite
Zakaria, Z., & Kuah, Y. C. (2024). SMEs fintech financing: does board governance matter?. Gadjah Mada International Journal of Business, 26(2), 185-207. Retrieved from https://jurnal.ugm.ac.id/v3/gamaijb/article/view/14790
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Gadjah Mada International Journal of Business by Master of Business Administration, Faculty Economics and Business, Universitas Gadjah Mada is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
