Exact(14)
In order to provide small businesses with a fair and efficient access to external capital, three changes are required.
These are fundamentally sound exemptions that if properly balanced could help markedly to improve the plight of small businesses in regard to access to external capital.
In a recent study, MIT Sloan Prof. Nemit Shroff looked at this question and found that regulatory oversight increases investor confidence in the audit process, which translates into greater access to external capital for companies.
Information asymmetry between firm managers and outside investors constrains firms' access to external capital and increases management's incentives to retain more earnings rather than pay them out as dividends.
The study highlights a novel link between the financing of supplier firms and the financial health of their customers and shows how an increase in risk can limit access to external capital.
Although every company's situation is unique, there are some common themes that managers would do well to bear in mind when tackling the current crisis.Don't bet on the bankOne thing not to take for granted, even for firms with strong balance-sheets, is that they will get access to external capital.
Similar(46)
Access to further external capital was needed to fund growth, said Mr Crombie, adding: "While being a mutual has been a key part of Standard Life's success in the past, we now believe that raising further capital by way of demutualisation is likely to be in the best interests of the company and its policyholders".
Measures should be adopted to make it easier for mutuals to raise external capital, while employee-owned companies "shouldn't be taxed inappropriately".
"Banks should limit distributions and give serious consideration to raising external capital in the coming months," the committee said.
That implies cuts to bonuses and, possibly, straightforward capital-raisings since the Financial Policy Committee thinks bank boards should "give serious consideration to raising external capital in coming months".
So for huge market cap, household names with cash-efficient models that don't need to raise external capital, I absolutely think it could be a right fit.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com