Corporate governance attributes and listed SMES’ debt maturity

• Pages: 735-750
• DOI: https://doi.org/10.1108/CG-11-2017-0272
• Date: 22 May 2019
• Published date: 22 May 2019
• Author: Anahí Briozzo,Clara Cardone-Riportella,Myriam García-Olalla
• Subject Matter: Strategy

Corporate governance attributes and

listed SMES’debt maturity

Anahí Briozzo, Clara Cardone-Riportella and Myriam García-Olalla

Abstract

Purpose –This paper aims to develop a cross-country analysis of the similar ities and differences in

the debt maturity structure of listed SMEs from the point of view of corporate gov ernance (CG)

attributes in two different economic environments: an OECD (Spain) countr y and a non-OECD

(Argentina) country.

Design/methodology/approach –Using data from listed SMEs in the Argentinian SME segment

(pooled data from 2012 to 2015) and 31 listed SMEs in the Spanish Mercado Alternativo Bursa

´til for

growingfirms (MAB_GE)(2014), bivariate and multivariateanalyses are performed.

Findings –Spanishfirms with a higher ownership concentrationand a large controlling shareholderhave

higher short-term liabilities(STL) ratios. Participation of women on the board has a negative relationwith

the STL ratio only for Spain. The participation of corporations in ownership and a Big4 auditor have a

negativerelation with the STL ratio for both countries.

Practical implications –These resultswill help SME managers understand the effects of the application

of good governancepolicies. The study also gives regulatorsa guideline to develop standardsto assist in

efficientborrowing in terms of seeking funding in alternativecapital markets.

Originality/value –First, the results provide evidence about the financial impact on the STL ratio of

CG attributes in listedSME. Second, as far as the authors know, this isthe first paper to analyse the CG

attributes of listed SMEs in an OECD country and a non-OECD country. Third, the paper presents CG

data derivedfrom an ad hoc basis elaborated from differentwebsites and databases.

Keywords Corporate governance, SMEs, Financial management,

OECD country and non-OECD country

Paper type Research paper

1. Introduction

A growing body of research has begun to analyse the impact of applying corporate

governance (CG) recommendations to SMEs. The recent financial crisis has forced SMEs t o

look for new forms of finance as an alternative to bank financing, which is the main reason why

alternative equity and fixed income markets are growing in many developed and developi ng

economies (Young et al.,2008). The OECD Principles of Corporate Governance (PCG-1999-

2004-2015) try to respond to CG developments to reflect the experiences of OECD and non-

OECD countries. A cross-country analysis of similarities and differences in the debt maturity

structure (DMS) of listed SMEs from the point of view of the CG of two econo mic environments

is a topic that still has not been analysed. This comparison is of special interest given

Argentina’s interest and prospects of joining the OECD nearly in the future. The conclusio ns of

this work are useful for this country and others that wish to follow this path.

In this introduction, we will comment some characteristics of the studied countries. SMEs

represent a very important part of the economy in almost every country in the world. In

Spain, SMEs represent 99.89 per cent of all firms, and in Argentina, they represent 99.7 per

cent. When such financing comesfrom capital markets, they are affected by the application

of the PCG. These principles areactively applied by governments, policymakers, investors,

Anahı

´Briozzo is based at the

Departamento de Ciencias

de la Administraci

on,

Universidad Nacional del

Sur (UNS), Bahı

´aBlanca,

Argentina and IIESS,

Universidad Nacional del

Sur-CONICET, Bahı

´a

Blanca, Argentina.

Clara Cardone-Riportella is

based at the Department of

Financial Economics and

Accounting, Universidad

Pablo de Olavide, Sevilla,

Spain and INDEM Center for

Business Research,

Universidad Carlos III de

Madrid, Madrid, Spain.

Myriam Garcı

´a-Olallais

based at the Department of

Business Administration,

Universidad de Cantabria,

Santander, Cantabria, Spain.

Received 9 November 2017

Revised 16 April 2018

12 July 2018

23 November 2018

11 February 2019

Accepted 28 March 2019

The authors appreciate the

useful comments received from

Gabrielle Wanzenried, Yi Liu and

the rest of assistants of the 24th

Annual Conference Multinational

Finance Society, Bucharest,

Rumania, 25-28 June 2017; and

comments received from

participants of the International

Council Small Business World

Conference, Buenos Aires,

Argentina, 28 June to 1 July

2017. The authors also thank

commentaries received from

participants in the International

Council Small Business World

Conference, Buenos Aires,

Argentina, 28th June –1st July.

DOI 10.1108/CG-11-2017-0272 VOL. 19 NO. 4 2019,pp. 735-750, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 735

firms, managements and stakeholders and have been adopted by the Financial Stability

Forum as one of the Twelve Key Standards for Sound FinancialSystems.

In Spain, there is an international alternative equity market for growing enterprises

(MAB_GE). This market belongs to and is operated by the Bolsas y Mercados Espan

˜oles

Sistemas de Negociaci

on, S.A. BMESN (2015) issued the General Rules of MAB_GE aimed

at regulating the operation of a multilateral trading system with specific characteristics.

Among the main regulatedaspects are three internal CG guidelines:

䊏the limited review of accounts every 6 months;

䊏control of the figure of nominated advisors; and

䊏the obligation to have a commission of independent auditors.

According to this MAB_GE General Regulation (2015), the Spanish listed SMEs were not

subject to CG guidelines until 9 March 2016 (Table I).

In Argentina, the National Securities Commission (NSC) (2013) regulations established the

NSC SME Regime for companies wishing to issue securities representing equity or debt in

Table I Geographic and temporal context

Argentina Spain

SME definition The Argentinian Secretary of Entrepreneurship and

Small and Medium Enterprises defines the

maximum amount of annual sales to be considered

an SME, based on annual sales and sector of

activity. The current legislation at the time of the

study was Resolution 11/2016, which establishes a

maximum annual sale of 33.75 for industry and

mining, trade 40.63 11.25 services, construction and

10 agricultural 16.88 (in millions of euros, exchange

rate peso-euro average $/e16 for the first semester

of 2016)

European Union Recommendation 2003/361/EC

‘‘The category of SMEs is made up of enterprises

which employ fewer than 250 persons and which have

an annual turnover not exceeding 50 million euro, and/

or an annual balance sheet total not exceeding 43

million euro’’

SMEs in the country

economy

In Argentina, 99.7% of the companies are micro,

small or medium enterprises. Together, they

generate 70% of private registered employment

(Cabrera, 2016)

In the EU-28, on average, 99.8% of total firms generate

around 60% of the gross value added and employ

nearly of 70% of the total employment (EUROSTAT,

2015)

SMEs Bank

financing

In Argentina 37.9% of small firms (fewer than 20

employees) and 58.9% of medium firms (20 to 99

employees) have a bank loan or line of credit. (World

Bank Enterprise Surveys, 2010)

On average 70% of the EU-SMEs are dependent on

bank financing. In Spain, the percentage is 80%. In

Asia, 50% and in USA 20% (BME, 2016)

Alternative capital

markets

Argentinean SME segment of Buenos Aires Stock

Exchange (SME_BASE)

Mercado Alternativo Bursa

´til - Empresas en

Crecimiento y Mercado Espan

˜ol de Renta Fija (MERF)

CG rules NSC requires listed firms to present a Corporate

Governance Code (Res.NSC 606/12) based on the

principle of comply or explain. SMEs are exempted

from this requirement

General Rules for MAB_GE.: the limited review of

accounts every 6 months, control of the figure of

nominated advisors, and the obligation to have a

commission of independent auditors

Legal system French Civil Law French Civil Law

Inflation rate

a

33.48% (2013-2016 annual average) 0.125% (2013-2016 annual average)

Opacity Index

Milken Institute

(2009), C L E A R

b

42 World Bank Development indicators for Spain,

26

Notes:

a

Instituto Provincial de Estadı

´

stica de San Luis for Argentina. World Bank Development indicators for Spain;

b

The opacity index

varies from 0 to 100; a higher value indicates higher opacity. The Opacity Index is composed of the following indicators: C: Corruption,

L: Legal System, E: Enforcement, A: Exposure and accounting standards, and R: Regulatory quality. In all cases, a higher value

indicates poorer quality of the measured variable

Source: Authors Elaboration

PAGE 736 jCORPORATE GOVERNANCE jVOL. 19 NO. 4 2019