The thesis aims to explore the different financial instruments used by Swiss SMEs in the manufacturing industry and factors that influence SMEs when making financial decisions. In this sense, growth, size, age and its impact on financial decision making are examined. Moreover, this research is trying to investigate how satisfied SMEs are with their financial instruments and bank loans in particular, which can also influence SMEs in making financial decisions.
This research was realised using a mixed research approach. Qualitative data was collected by conducting 12 semi-structured interviews with SMEs and experts in the field. For collecting quantitative data an online survey was sent to 1’004 SMEs. All data was collected from companies located in the German speaking part of Switzerland.
Swiss SMEs in the manufacturing industry follow a clear strategy when it comes to financial decision making. In general, the examined enterprises want to act flexible, independent and are risk-averse. These characteristics are reflected when making financial decisions. With regard to family businesses independence is even more important.
Therefore, SMEs focus on using financial instruments that perfectly fit to their strategy. The main instruments used are retained earnings, personal savings, bank loans and family and friends. Size and growth mostly does not have a strong impact. However, the outcomes of the online survey show that growth might have an impact on retained earnings. As most examined SMEs are equipped with a lot of equity these enterprises have no problems when asking for bank loans. The online survey and the conducted interviews further show that most SMEs are satisfied with the available financial instruments and bank loans in particular. This research also concludes that almost no financing dilemma exists. A finance gap is also nearly not existent.
The small sample size with regard to the online survey and limited scope used in this research does not allow generalisation to the population. As SMEs often have a lack of time and are not willing to share financial information to externals it was difficult to find interview partners.
Table of Contents
1. Introduction
1.1. Research Objectives
1.2. Structure of the Thesis
1.3. Research Question
2. Literature Review
2.1. Definition of SMEs
2.2. Growth stages and the impact of age and size of a company
2.3. Finance and Capital Structure of SMEs
2.3.1. Relevant Theories
2.3.2. Financial Instruments
2.4. Market Characteristics
2.4.1. SME Switzerland
2.4.1.1. Employment and Industry Characteristics
2.4.1.2. Financial Structures
2.5. Conceptual Framework
3. Research Methodology
3.1. Research Question and Hypotheses
3.2. Research Design
3.3. Sampling Strategy
3.4. Data Collection
3.4.1. Quantitative Research (online survey)
3.4.2. Qualitative Research (interviews)
3.5. Data Analysis
3.5.1. Triangulation
3.6. Limitations and Critical Reflections
3.7. Researcher’s Role
3.8. Ethical Considerations
4. Outcomes
4.1. What is a typical financial structure of SMEs in Switzerland?
4.1.1. Summary
4.2. Does firm size affect SMEs’ financial decision making?
4.2.1. Summary
4.3. Does employment growth affect SMEs’ financial decision making?
4.3.1. Summary
4.4. How satisfied are SMEs with their financial structure? What would they improve and why?
4.4.1. Summary
5. Conclusion
5.1. Reflection on the Research Question
5.2. Other Findings
5.3. Contribution to Literature and Practice
5.4. Insights for Further Research
Research Goal and Themes
This master thesis investigates the financial structures of Swiss small and medium-sized enterprises (SMEs) within the manufacturing industry to identify the key factors influencing their financial decision-making processes.
- Analysis of financial instruments utilized by Swiss manufacturing SMEs.
- Evaluation of the impact of firm size and age on financial strategies.
- Examination of the relationship between employment growth and financial choices.
- Assessment of SME satisfaction levels regarding bank loans and existing financial structures.
- Exploration of the "financing dilemma" and the use of the pecking order model in the Swiss context.
Excerpt from the Book
4.1. What is a typical financial structure of SMEs in Switzerland?
Figure 9 shows that the majority of enterprises used bank loans, retained earnings and personal savings in order to get financed. Literature also mentiones that enterprises, especially very small ones, are financed by personal savings and family and friends. Bank loans are also a common method to get SMEs financed. According to bank loans, the results slightly differ in comparison to the results of SECO (2013) discussed in chapter 3. In total, 51 per cent of the 1’004 interviewed SMEs are financed by bank loans. However, SECO (2013) did not exclude very small enterprises and did not focus on the German speaking part of Switzerland only.
It is also not surprising that IPO, crowdfunding and awards were not used at all. This is justified by the fact that IPO is commonly used by larger enterprises. Crowdfunding and awards are typically used by very small enterprises. Furthermore, it is not common that companies in the manufacturing industry are using crowdfunding, as investors usually need to get emotionally attached or should have an affinity to the product.
The interviews conducted at SMEs show that the results are similar to the outcomes of the online survey reported above. Likewise, none used crowdfunding, awards or bonds. Only one company utilised IPO and is listed on the stock exchange in Bern. However, as only around 40 SMEs are listed on the stock exchange in Bern it is not natural to reach them for interviews. It is also interesting to see that this company is rather small. The interviews showed that many SMEs are financed conservatively by retained earnings, bank loans, personal savings or family and friends. Especially family businesses are heavily financed by equity. Some of them are even only financed by equity using retained earnings and family and friends.
Summary of Chapters
1. Introduction: This chapter introduces the importance of SMEs in the Swiss economy and outlines the research objectives, the structure of the thesis, and the core research question.
2. Literature Review: This section provides a theoretical foundation by defining SMEs, discussing growth stages, and reviewing existing theories on capital structure and financial instruments.
3. Research Methodology: This chapter details the mixed research approach, including the sampling strategy, the use of online surveys and semi-structured interviews, and the data analysis methods employed.
4. Outcomes: This section presents the empirical findings derived from the collected data, addressing the sub-questions regarding financial structures, firm size, growth impact, and satisfaction.
5. Conclusion: This final chapter synthesizes the research findings, reflects on the research question, provides contributions to existing literature, and suggests areas for future research.
Keywords
SMEs, SME financing, financial instruments, bank relationship, financial structure, retained earnings, manufacturing industry, Swiss economy, capital structure, equity, growth stages, pecking order model, bank loans.
Frequently Asked Questions
What is the core focus of this research?
The research explores the financial structures and decision-making processes of small and medium-sized enterprises (SMEs) specifically within the Swiss manufacturing industry.
What are the central thematic areas covered?
The study centers on financial instruments, the influence of firm size and growth on financial decisions, and the overall satisfaction of SMEs with their current financing methods.
What is the primary research question?
The central guiding question of this thesis is: "Which factors influence SMEs in their financial decision making?"
Which methodology was applied?
The author utilized a mixed research approach, combining quantitative data from an online survey sent to 1'004 SMEs with qualitative insights from 12 semi-structured interviews with industry experts and SME representatives.
What topics are addressed in the main body?
The main body covers the literature review of financial theories, the conceptual framework of SME financing, the empirical methodology, and the analysis of survey and interview outcomes regarding financing behaviors.
What are the key terms that define this work?
Key terms include SME financing, capital structure, bank relationships, manufacturing industry, retained earnings, and financial instruments.
Does the study confirm the existence of a "financing gap" for Swiss SMEs?
The findings indicate that a financing gap is nearly non-existent for the examined Swiss manufacturing SMEs, as most companies maintain a strong equity-based financing strategy.
Why do SMEs prefer retained earnings over other financial instruments?
According to the research, SMEs prioritize retained earnings primarily to maintain independence, stay flexible in decision-making, and avoid the complications and costs associated with external interest-bearing debt.
- Citar trabajo
- Jonas Josef (Autor), 2015, Financial Structures of Swiss SMEs in the manufacturing industry, Múnich, GRIN Verlag, https://www.grin.com/document/323202
