Effect of Debtors on Performance of Small and Medium Enterprises

dc.contributor.authorRichard, Evelyn
dc.date.accessioned2019-02-19T03:21:35Z
dc.date.available2019-02-19T03:21:35Z
dc.date.issued2018-10
dc.description.abstractThe paper assesses effect of credit sales on performance of small and medium enterprises (SMEs) in Tanzania using the credit risk management perspective. Asymmetric information and trade-off theory of liquidity guided the study whereby a dataset of 6,134 Tanzanian SMEs was used. Descriptive and regression methods were used as analyses techniques. Results confirm that majority of SMEs sell on credit (54%). Despite efforts they put into managing their debtors, 26 percent of them default. The results further showed that SMEs incur relatively high costs when managing debtors, an aspect, which hampers their performance. Costs incurred relate to financing, administration and moral hazards problems. The paper contributes to asymmetric information and tradeoff of liquidity theories by showing how the relationship between SMEs and debtors can be hampered by ex-post asymmetric information whereby debtors decide to act in their own interests but against seller's interests, a pattern, which contravenes terms of their contracts. The study highlights main challenges faced by SMEs while managing debtors. Bad debts put pressure on SMEs’ cash flow thereby limiting growth of their businesses. Education level was seen to be important when managing debtors.en_US
dc.identifier.citationRichard, E., & Mori, N. (2018). Effect of Debtors on Performance of Small and Medium Enterprises. ORSEA Journal, 8(1), 13.en_US
dc.identifier.urihttp://hdl.handle.net/20.500.11810/5074
dc.language.isoenen_US
dc.subjectCredit Salesen_US
dc.subjectPerformanceen_US
dc.subjectCredit Risk Managementen_US
dc.subjectSMEsen_US
dc.titleEffect of Debtors on Performance of Small and Medium Enterprisesen_US
dc.typeJournal Article, Peer Revieweden_US
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