The paradox of investment timing in small business: Why do firms invest when it is too late?

Nguyen, Bach, Le, Chau and Vo, Vinh (2020) The paradox of investment timing in small business: Why do firms invest when it is too late? Journal of Small Business Management . ISSN 0047-2778

Full content URL: https://doi.org/10.1080/00472778.2020.1816436

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The paradox of investment timing in small business: Why do firms invest when it is too late?
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Abstract

This article aims to tell the “gamble of resurrection” story for small owner-managed firms. Analyzing a set of private firms in Vietnam, we find that for firms that are less financially constrained, an increase in the degree of financing constraints leads to a decrease in the use of entrepreneurs’ personal capital. However, once critical value of constraints is reached, this relationship reverses. Specifically, deferring investments that would otherwise be in time may result in firms’ experiencing such serious financial distress that the entrepreneurs will invest their personal capital to try and maintain their firms’ survival even though it may be too late.

Keywords:Cash flow, Financial constraints, Investment behavior, Personal capital, Small business
Subjects:N Business and Administrative studies > N300 Finance
N Business and Administrative studies > N100 Business studies
N Business and Administrative studies > N340 Financial Management
Divisions:Lincoln International Business School
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ID Code:42639
Deposited On:19 Oct 2020 11:24

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