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‘An Action Research Project Investigating the SME Credit Decision Process in a Financial Services Organisation’

O'Byrne, Aidan, W. (2014) ‘An Action Research Project Investigating the SME Credit Decision Process in a Financial Services Organisation’. Masters thesis, Dublin, National College of Ireland.

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The aim of this study is to help a financial services organisation to make better SME credit decisions. The research is unique because it includes data from Irish SMEs, which is hoped will facilitate discussion and review within the Irish business context. While in an Irish setting, the evidence is applicable to a broader population, representing an area of further study, i.e. replicating this study across geographic boundaries.

Design / Methodology / Approach:
This study used an Action Research methodology. The initial focus was on generating qualitative findings in a Community of Practice setting. This evolved into specific quantitative research with final outcomes generated through the Altman Z-Score framework.

Fifty six relevant SME businesses were identified. Balance Sheet and Profit and Loss (Income) Statement data was analysed by reference to generally used financial assessment ratios and by usage of the Altman Z-Score methodology (1968).This research builds upon Altman’s work arguing that his methods are equally valid today when assessing the financial status of SME businesses.

The findings from this study indicate that:
1) There is compelling evidence that a Community of Practice was formed in this case and that this grouping has carried out work that will help the organisation to make better credit decisions.

2) There is a statistically significant difference between the financial performance of Non-Trading and Trading SME businesses and their comparative likelihood of business failure as measured by the Altman Z-Score.

Practical Implications:
Key learning outcomes are described and a practical approach for lenders, business owners, accountants and suppliers of trade credit is suggested. Significant differences between the Non-Trading and Trading group performances can be used to diagnose the financial health of SME businesses.

Originality / Value:
The outcomes from this study are based on Irish SME data and have practical value for various stakeholders including bankers, accountants and SME owner managers who routinely need to make SME-based credit decisions. Practical recommendations for future study as well as current applications of the findings are proposed.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance > Financial Management
H Social Sciences > HD Industries. Land use. Labor > Small Business Sector
Divisions: School of Business > Master of Science in Management
Depositing User: Claire Wallnutt
Date Deposited: 14 Nov 2014 14:59
Last Modified: 24 Nov 2014 14:40

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