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Capital Growth, Financing Source and Profitability of Small Businesses: Evidence from Taiwan Small Enterprises

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Abstract

This paper examines the relationship between profitability and financial capital for 1,276 small firms in Taiwan over the period 1992–1997. The results indicate a statistically positive relationship between profitability and capital growth. When financial capital is further divided into debt and equity, the results indicate a significantly positive relationship between profitability and equity financing, but a significantly negative relationship between profitability and debt financing. Moreover, the profitability of small firms is positively related to both the external economic conditions and the firms’ previous profitability.

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Authors and Affiliations

  1. Graduate School of Financial Resource Management, National Defense Management College, Taipei County, Taiwan, ROC

    Tze-Wei Fu

  2. Department of Industrial Engineering and Management, National Chin-Yi Institute of Technology, Taipin, Taichung, Taiwan, ROC

    Mei-Chiu Ke

  3. Department of Business Administration, National Taiwan University of Science and Technology, 43 Keelung Road, Section 4, Taipei, Taiwan, ROC

    Yen-Sheng Huang

Authors
  1. Tze-Wei Fu
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  2. Mei-Chiu Ke
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  3. Yen-Sheng Huang
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Fu, TW., Ke, MC. & Huang, YS. Capital Growth, Financing Source and Profitability of Small Businesses: Evidence from Taiwan Small Enterprises. Small Business Economics 18, 257–267 (2002). https://doi.org/10.1023/A:1015291605542

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