An assessment of impact of socio-economic factors on SMEs’ capital struture decision in Tanzania : A case of Morogoro municipal council
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Date
2015
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Publisher
Mzumbe University
Abstract
Deciding the suitable capital structure for small and medium size enterprises, SMEs, is vital. Sometimes the decision is affected by socio decision factors that constitute entrepreneur profile and firm and financial attributes. A suitable capital structure helps SMEs to stay alive in the competitive market and has a positive effect on the national economy. The purpose of this thesis was to investigate the impact of the socioeconomic factors on SMEs‟ capital structure decisions. The researcher consulted the relevant theories of capital structure. By the support of the earlier studies, as well as the related theories and developed the testable hypotheses. Tools used in data collection were; questionnaires (open and closed), interview and documentary review. Specific objectives were to: assess the capital structure and capital structure decision of SMEs, examine the factors that affect SMEs‟ capital structure decision; and assess the impact of the SMEs‟ capital structure decisions on financial performance using a total of 110 respondents from four wards of Morogoro municipality in Morogoro region. Data were analyzed by using SPSS to ensure accuracy in data presentation and easy interpretation. Findings of this study revealed that there are several impacts of microeconomics factors resulting from entrepreneur’s profile and SME‟ characteristics on capital structure decision and financial performance. Thus, SMEs‟ capital structure decisions and financial performance were affected by the socioeconomic factors which mostly have impacts on SMEs leverage levels are different in terms of magnitude but little in direction. The study recommends that SMEs owners/managers should be investment ready by providing collateral's, the government could support the education and training and SMEs should attend seminars and training programmed to improve on their managerial competence and skills of entrepreneurship. In addition to that, the government should also establish a mechanism that will help SMEs to get debt finance even if they do not have collateral to improve and reach optimal capital structure decision and highly financial performance
Description
A dissertation submitted to school of business in partial fulfillment of the requirements for the award of Master Degree of Science in Accounting and Finance ( MSc.A&F) of Mzumbe University
Keywords
SMEs‟ Financial Performance, SMEs‟ Capital Structure, SMEs‟ Capital Structure Decision
Citation
APA