Ownership structure, business growth and financial performance amongst SMEs: From Australia's business longitudinal survey

The purpose of this research is to examine in some depth the relationships between ownership structure, business growth and financial performance amongst small and medium‐sized enterprises (SMEs) with different degrees of overlap between management and ownership.

The research employs panel data for 1,872 SMEs legally organised as proprietary companies, taken from the Australian federal government's Business Longitudinal Survey for three financial years from 1995‐1996 to 1997‐1998.

The study finds that there is no statistically significant relationship between the proportion of equity held by SME managers and achieved business growth in the businesses examined. Furthermore, for most financial performance measures examined, it would appear that there is no statistically significant relationship between the proportion of equity held by SME managers and achieved financial performance in the businesses examined.

This is the first such investigation undertaken with SMEs and the findings are consistent with prior research on large business concerns. The findings can be seen as seriously challenging the relevance of agency theory in its application to smaller businesses.