Impact of Listing on Strategic Corporate Finance of SME's
"Management Strategies and Practices in Dynamic Global Environment" (2012), ISBN 81-7095-133-x, pp. 38-47
Posted: 28 Sep 2016
Date Written: 2012
Abstract
The socio-economic contribution of small and medium scale industries in India has always been significant, and is increasing over a period of time. The financial objectives of profit maximisation and shareholders’ wealth maximisation are equally applicable to these enterprises, even with a relatively smaller scale of operations. To achieve these objectives, top management takes various decisions which can be broadly classified as investing decisions, financing decisions, dividend decisions and working capital decisions.
The corporate finance issues related to SME’S are unique and cannot be compared with those relating to large companies. The achievement of financial objectives largely depends upon availability of funds. Availability of funds for carrying out the business is critical both for further growth and expansion of existing SMEs and for attracting more entrepreneurs.
There are a few traditional sources of raising of funds by SMEs. Recently, SEBI has given one more option by allowing SMEs to raise funds from the open market. Earlier the equity shares of small scale industries were not allowed to be listed; however recently the listing is allowed. It is going to have an impact on strategic corporate finance of SME’s in India.
While SME listing has been allowed in a few other countries such as UK, USA, Japan; it is allowed for the first time in India. In the current economic scenario, raising of funds by SME’s through capital markets will definitely help in strengthening the Indian economy.
The article reviews the present regulations and status of raising of funds through capital market by SMEs. It further analyses how raising of funds through capital market will affect SME’s in different aspects related to strategic corporate finance, such as financial decision making, valuation of securities and company, risk management, performance measurement, corporate governance, mergers and acquisitions etc.
Keywords: SME, Listing, Impact, Strategic Corporate Finance
JEL Classification: G24, G28, G34, G38
Suggested Citation: Suggested Citation