Role of Small and Medium Enterprises in Managing Financial Liquidity in Corporate Sector: A Case Study of Pakistan

Abstract

This study recognizes the importance of small and medium enterprises in improving the financial liquidity in the corporate sector. These enterprises play an important role in the sale of finished products on credit and managing the inventories of merchandizing goods. Consequently, the burden of inventory holding and receivables from consumers is transferred from large-scale industries to small and medium enterprises (SMEs). In such ways, they facilitate the large-scale manufacturers. Large-scale firms can focus on investment in fixed assets. This mechanism promotes the expansion of business activities in the economy. The small and medium enterprises in Pakistan play also an important role in earnings from exports. To identify these linkages is the main concern of the study. The study identifies the determinants of inventories, receivables, exports, and spending on employment. The study is based on 6 years’ data from 398 companies listed on the Pakistan Stock Exchange, while panel least square techniques have been applied to estimate the parameters.