Getting rich isn’t always glorious
It’s well known that small and medium-sized enterprises struggle to grow, but maybe they’re content as they are. A new
study out of the University of Waikato has found support for what’s known as the ‘contentment hypothesis’, and it’s won
best paper award at Waikato Management School’s 13th Annual Student Research Conference.
Kenny Bell, who has just completed a Bachelor of Computing and Mathematic Sciences with honours, majoring in mathematics
and finance, analysed a survey of more than 2,000 SMEs in seven countries, and found no evidence to show that smaller
firms faced greater obstacles in sourcing external funds. Instead, he found that the most important factor in deciding a
firm’s capital structure was the firm’s own desire for financing.
“Previous studies of capital structure in SMEs have presupposed these firms largely act to maximise their financial
wealth, which means they seek to grow and need external finance to do so,” says Bell. “And if they don’t grow, the
presumption is that somehow they can’t access external financing. My research shows that’s not in fact the case. There’s
more external finance out there than is commonly thought; but many firms simply don’t want it.”
He also found that business owners with a higher level of education tended to favour less external debt, offering
support for the contentment hypothesis explanation that these owners are wiser, less concerned with financial wealth and
more concerned with retaining control of their businesses.
“My findings indicate that we need to change the way SMEs are studied. We need to consider the different intentions and
objectives of small firms, and we can’t simply assume that all SMEs are looking to grow in order to maximise their
financial wealth.”
Bell is now planning to embark on a PhD looking more closely at the issues raised by his research – and in particular
the assumption that more educated business owners are ‘wiser’. “My success at the Student Research Conference was a big
factor in my decision,” he says. “I felt it really gave me credibility as a researcher and gave me more confidence in
being able to obtain funding for my PhD on this topic.”
More than 50 student researchers from 12 universities in New Zealand and Australia presented research papers at the
conference, held last week at Waikato Management School. The award for the best presentation went to Yvonne Matthews
from Waikato Management School who delivered a paper entitled “Valuation of Environmental Improvements to Hamilton
Streams: A Choice Modelling Approach
ENDS