Financial Innovation in Medium-Sized Enterprises Optimizes Their Gravitation Towards Capital Markets: Financial Future in Perspective

Financial Innovation in Medium-Sized Enterprises Optimizes Their Gravitation Towards Capital Markets: Financial Future in Perspective

Milan B. Vemić (Higher School of Academic Studies “DOSITEJ”, Serbia)
Copyright: © 2017 |Pages: 27
DOI: 10.4018/978-1-5225-1949-2.ch010
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Abstract

A major problem for medium enterprises is ensuring that their financial management exercises prudence in the attraction of alternative sources of financing in transition into middle tier, larger enterprise status and towards stock exchange. Difficulties in attracting capital, the high cost of bank credit, absence of robust financial and business information reporting capacities may represent obstacles. One partial solution is capacity development for access to stock exchanges and having these institutions with a strong allocation capacity to efficiently finance these businesses. Though underdeveloped in transition economies, they are potentially important institutions in successful financial performance of businesses. In a review of conditions for handling risk and uncertainty, developing capacity for access to stock exchanges through working capital combinations, this treatise demonstrates that medium enterprises could benefit from this approach. Regulatory reforms to facilitate the use of stock exchange financing and well-designed financial management models are recommended.
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Background On Access To Finance As A Growth Opportunity For Medium-Sized Enterprises

The author recognizes that various countries define SMEs differently and that cross comparison can be difficult. Medium-sized enterprises are defined as enterprises that employ fewer than 250 persons and either have an annual turnover that does not exceed EUR 50 million, or an annual balance sheet not exceeding EUR 43 million, which follows the European definition (European Commission, 2015a, p.11). The precise definition however, does not impact the overall findings of this treatise.

Compared to small firm financing medium-sized enterprises should be less risky due to lower levels of perceived risk and uncertainty. This is followed by their greater investment readiness. Although the standard measure of risk is the value of variance in relation to expected return (Eales, 1995, p.15) the basis for above is author’s resource based view of a stronger financial base and market share of medium-sized enterprises.

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