Many empirical studies have shown that transition countries urgently need entrepreneurship and strong SMEs to successfully close the process of restructuring to market economy. Unfortunately, both the supply and demand sides of the market for equity capital pose serious questions about how far this source of capital, either through venture capital funds or the »business angels« type of finance, can provide workable solution to the imminent gap in SME finances and whether the government should support it by offering preferential treatment to investors. Recognizing and assessing equity of small scale enterprises, SMEs in particular, the need to identify drivers and inhibitors of utilization of such private equity and testing it through combination of qualitative and quantitative survey data. Ideally, intention to finance with private equity explains variations in actual private equity utilization.
Attitude, social norm and perceived behaviour control determine intention. SME should be packaged with hands-on involvement, rely on monitoring by means of milestones and supervisory council control, and should avoid interfering with operations and the owner managers' relationship with core personnel. It is best distributed through the involvement of intermediaries, especially banks. Preliminary literature applies in this research, case study application and analysis will be a core part this will be in a form of narrative inquiry by means of examples and case situations. Another, is utilizing of case study survey this will be in a form survey statements noting in responses to respondents of research, this will be human subjects. A total of 10 SME executives located in Pakistan will be asking to participate in the case survey, it should be in voluntary participation. This will be presented and analyzed through five point scaling system, ratios ranging from point 1 to point 5 of strongly agree down to strongly disagree. Fifteen statements will be created and this will be in content focus on what should be the sense of equity matters as this will be in accordance to the overall rsearch process along with literature organization and cases found within reviewed articles and or journals.
1 Strongly Disagree | 2 Disagree | 3 Neutral | 4 Agree | 5 Strongly Agree |
No | STATEMENTS |
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1 | Higher returns on other financial investments | 1 | 2 | 3 | 4 | 5 |
2 | Level of trust between entrepreneurs and investors | 1 | 2 | 3 | 4 | 5 |
3 | The general attitude of SMEs to equity investments | 1 | 2 | 3 | 4 | 5 |
4 | Complicated and expensive formal transfer of ownership | 1 | 2 | 3 | 4 | 5 |
5 | Investors are not willing to wait longer for appropriate returns | 1 | 2 | 3 | 4 | 5 |
The equity industry is often considered as solution to the financing problems of high risk entrepreneurs. Little is known, however, about whether this common wisdom is true to the reality of high-tech financing in heavily bank-based financial systems such as the Pakistani related system. Are more risky high-tech firms indeed more likely to receive equity than debt financing? Research study explores relation, so-far neglected, between the degree of risk embedded in projects and means of financing projects, the indicators describing the financial risk of a project or an enterprise are important predictors for the choice of the financing mode such as risky projects tend to receive equity financing. In addition, given that countries the private equity industry is in similar stage of development, it would be interesting to know whether comparable results would emerge in these countries. Few SMEs satisfy listing requirements of most stock exchanges.
Moreover, the high costs involved in the process complying with securities regulations, hiring professionals, even if they could afford it, the high costs would not be justified by the relatively small amounts businesses often seek at the early stages of their life cycles. In particular, SMEs with low price cost margin and low ratio of equity to assets possess significantly higher chance of receiving equity finance and due to the considerable cost associated with the screening and coaching activities of many equity financiers that may be justified and recouped only for large deals. Whether there is a sign that SME related banks implicitly restrict certain financial risk by limiting the amount of loan granted or whether this result simply reflects the fact that banks stage their financing more than private equity financiers remains to be investigated using information on follow-on finance. More research is needed to identify differences in attitudes towards risk within the broad categories of debt and equity financiers and to explore the consequences of specific financing mode for the firm's performance.
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