Impact of SME Listing on Capital Structure Decisions

ScienceDirect, Procedia Economics and Finance, Volume 11 ( 2014 ), pp 431 – 444

Posted: 28 Sep 2016

See all articles by Prasanna Kulkarni

Prasanna Kulkarni

Symbiosis Institute of Telecom Management; The Institute of Chartered Accountants of India

Abhijit Chirputkar

Symbiosis Institute of Telecom Management, Constituent of Symbiosis International University

Date Written: 2014

Abstract

So far, the capital structure of Indian small and medium scale enterprises has been typical. There have been constraints on the amount of total funds that can be raised including equity the owners can privately raise. Funding has come mainly from banks or owned funds. The long term debt has been limited by debt equity ratio and assets available as securities; while the short term funding has been subject to “maximum permissible bank finance” (MPBF). While the sector has shown promise, inability to raise adequate funds from banks especially for growth and expansion, incapability to recruit and retain professional talent, lack of professional management and consequent financial sickness, have been major impediments in the realisation of its full potential.

SME listing has been allowed in a few other countries, but in India, the sector was so far deprived of direct access to public funding through capital markets. Now, SMEs are allowed to raise funds in the equity market through SME stock exchange platform (BSE & NSE). Equity shares of small and medium scale companies are now allowed to be listed. The listing of SMEs will help this sector to raise funds, enabling expansion, growth, and to achieve its objectives. The value of these firms will increase, leading to more investor benefits, more tax collection, employment generation, wider distribution of wealth, and economic growth as well as development.

Keywords: SME listing, impact, capital structure decisions

JEL Classification: G24, G28, G31, O1

Suggested Citation

Kulkarni, Prasanna and Chirputkar, Abhijit, Impact of SME Listing on Capital Structure Decisions (2014). ScienceDirect, Procedia Economics and Finance, Volume 11 ( 2014 ), pp 431 – 444, Available at SSRN: https://ssrn.com/abstract=2843522

Prasanna Kulkarni (Contact Author)

Symbiosis Institute of Telecom Management ( email )

Symbiosis Knowledge Village
Village Lavale
Tahsil Mulshi, Pune 412115
India

HOME PAGE: http://www.sitm.ac.in

The Institute of Chartered Accountants of India ( email )

Indraprastha Marg,
Post Box. No. 7100
New Delhi, New Delhi 1110002
India

HOME PAGE: http://www.icai.org

Abhijit Chirputkar

Symbiosis Institute of Telecom Management, Constituent of Symbiosis International University ( email )

Village Lavale
Pune, MA 412115
India

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