Qatar Investment Activities Sample Essay

Qatar Investment Activities Sample Essay

TABLE OF CONTENTS

List of Tables 5

List of Figures 6

Forward 7

Executive Summary 8

  1. Introduction 9
    1. Background of the Problem 10

1.2. Background of the Study 13

  1. Objectives of the Study 16
    1. Problem Statement 18
    2. Objectives of the Study 19
    3. Hypothesis Statement 19
    4. Additional Research Questions 20
    5. Research Limitations 20
  2. Literature Review 22
    1. Introduction 22
    2. The Importance of small and medium-size enterprises (SMEs) 22
    3. The Role of Investment Banks 27
    4. Summary of Key Points 29
  3. Collection of Primary Data 30

4.1. Methodology 30

  1. Analysis and Conclusion 47

5.1. Theoretical Testing of Major Hypothesis 48

References 75

Appendix I: Questionnaire 81

Appendix II: STATA Regression Results 83

Appendix IV: Thesis Approval Form 87

List of Tables

Table 1: Summary Statistics of Variables 47

Table 2: Regression Results for Question 8 (Utilize investment banking functions) 58

Table 3: Regression Results for Question 9 (whether investment banking functions should be under development banks) Qatar Investment Activities Sample Essay 61

Table 4: Regression Results for Question 10 (whether small and medium-size enterprises (SMEs) would utilize investment banking functions under development banks) 63

Table 5: Regression Results for whether investment banking functions are valuable for small and medium-sized enterprises (SMEs). 65 Qatar Investment Activities Sample Essay.

List of Figures

Figure 1: Asset Size of the Financial Institutions (% of the World GDP) 11

Figure 2: Most Pressing Problems Faced by Euro Area small and medium-sized enterprises (SMEs) (% of respondents) 26

Figure 3: Question 1: Have you ever had relations with any development bank? 39

Figure 4: Questions 2: To what extent do you agree that the functions and finance provided by the Development Banks are valuable for small and medium-sized enterprises (SMEs)? 39

Figure 5: Question 3: To what extent do you agree that it would be useful for small and medium-sized enterprises (SMEs) go public and get listed in the stock markets as a way of increasing the scalability and attracting more capital? 40

Figure 6: Question 4: To what extent do you agree that Merger and Acquisitions increase the competitiveness of the small and medium-sized enterprises (SMEs) in the ecosystem? 40

Figure 7: Question 5: Does your firm have any intentions of going public? 42

Figure 8: Question 6: To what extent do you agree that the functions provided by the investment banks would be valuable for small and medium-sized enterprises (SMEs)? 42

Figure 9: Question 7: To what extent do you agree that the functions provided by the traditional investment banks are too expensive, thereby restricting the access of small and medium-sized enterprises (SMEs) to these banks and their services? 43

Figure 10: Question 8: To what extent do you agree that small and medium-sized enterprises (SMEs) would be more actively utilizing Investment Banking Function if they were provided at more affordable ways Qatar Investment Activities Sample Essay? 43

Figure 11: Question 9: To what extent do you agree that investment banks’ functions should be

provided by the Development Banks at more affordable and subsidized rates? 45

Figure 12: Question 10: To what extent do you agree that small and medium-sized enterprises (SMEs), including your firm, would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways? 45

Figure 13: Top 5 Sources of Finance for Business Start-ups in Qatar 49

Figure 14: Underserving of small and medium-sized enterprises (SMEs) Finance by Investment Banks 51

Figure 15: Subsidy 71

Figure 16: Subsidy with Scope Economies 73

Forward Statement

This research is driven by my passion for increasing the investment activities in Qatar which ultimately will create growth in its economy, and to expand the understanding of doing business beyond operating business ventures and investing and expanding these ventures Qatar Investment Activities Sample Essay. A vital element of the expansion of any business is attracting more capital to participate in its growth, and to develop a methodology for increasing investment activities through Mergers and Acquisitions and initial public offerings (IPOs) where investment banking functions are the leading players in their execution. Given that most of the companies are small and medium-sized enterprises (SMEs) who usually cannot afford the expenses of investment banking, I decided to do my research on the feasibility of providing such services through the Development Banks.

The results of this research could not have been achieved without the support of my family, namely, my parents and wife. Furthermore, I would like to thank my thesis advisor and the structural business statistics (SBS) faculty for their continued academic support.

Executive Summary

The present study examines the topic of whether including investment banking functions under the portfolio of development banks would be valuable for small and medium-sized enterprises (SMEs) and whether the small and medium-sized enterprises (SMEs) would utilize such services and products. The literature review shows that small and medium-sized enterprises (SMEs) are the engines of economic growth for both advanced and developing countries. In addition, they are responsible for an important segment of business investments and exports, as well as the large majority of employment growth. Therefore, the health and growth of small and medium-sized enterprises (SMEs) matter greatly for the overall economic performance and development of countries Qatar Investment Activities Sample Essay. However, the literature also shows that small and medium-sized enterprises (SMEs) face significant challenges, especially on the finance dimensions. Pure-play investment banks have little incentives to provide their services to small and medium-sized enterprises (SMEs). Development banks, on the other hand, can solve this problem of positive externality by undertaking functions of investment bank activities. Therefore, devising relevant policies and programs to support small and medium-sized enterprises (SMEs) on different dimensions, including finance side and investment banking functions, stand out as effective ways to improve the performance of small and medium-sized enterprises (SMEs). The results indicate that small and medium-sized enterprises (SMEs) have low utilization levels regarding the development and investment bank services. However, they state high levels of positive perceptions and usage intentions regarding investment banking functions if these services and products are provided under development banks Qatar Investment Activities Sample Essay.

Introduction

The financial sector plays a central role in modern economies (Brunnermeier & Sannikov, 2014; Demirguc-Kunt & Levine, 2008; Amel et al., 2004). Finance is claimed to be one of the essential drivers of innovation and growth, and many studies established a positive link between the financial development of a country and its economic performance (King & Levine, 1993; Favarra, 2003; Levine, 2005; Ang, 2008; Beck, 2008). Entrepreneurship and new ideas have to be funded, and the financial system is the key to raise the necessary amount of capital to turn innovations into profitable market opportunities (Wong & Zhou, 2011). Within the financial system, commercial and investment banks contribute to economic growth by delivering credit and loans to corporate actors. Banks are able to provide funds to borrowers by generating money from the deposits they receive from savers. As long as the deposits are sufficient and the share of non-performing loans is minimal, the banking system functions smoothly and helps to allocate financial resources efficiently. Central Banks regulate the monetary and financial markets to ensure that they operate without major problems and support the financial markets by injecting liquidity into circulation when private institutions fail to do so (Thomas, 2005) Qatar Investment Activities Sample Essay.

Hence, all segments of the banking system are important for the functioning of modern financial systems.

While the role of the financial sector and different financial institutions are widely acknowledged in academic and policy circles, the access to the real sector and especially the small and medium-sized enterprises (SMEs) to the financial sector can be restricted through different constraints. One such situation arises when firms have limited access to external finance (Beck et al., 2004; Demirguc-Kunt et al., 2007; Beck & Demirguc-Kunt, 2006; Karlan & Morduch, 2010; Lee et al., 2015). The relevant literature shows that limited access to finance in general or tightening of credit constraints during periods of economic volatility can be major factors limiting the potential of small and medium-sized enterprises (SMEs) and economic development. As another form of restriction that small and medium-sized enterprises (SMEs) face in the financial markets, one can mention the cost of finance. It is possible that small and medium-sized enterprises (SMEs) have access to the relevant financial services and products in a similar fashion to the established large companies, but the cost of finance can be very high for small and medium-sized enterprises (SMEs) relative to the larger companies, thereby limiting the use of these financial services and products by small and medium-sized enterprises (SMEs) (Jones-Evans, 2015; Machmud & Huda, 2011; Fatoki & Asah, 2011; Osana & Languitone, 2016; Ibrahim & Ibrahim, 2015). As a result, the high costs of finance can lead to constraints on the use of financial services by small and medium-sized enterprises (SMEs) Qatar Investment Activities Sample Essay. This is true for both access to finance in commercial banks and investment banks. The fees of investment banks can be especially very prohibitive for the small and medium-sized enterprises (SMEs). Therefore, examining whether subsidizing the access of small and medium-sized enterprises (SMEs) to different banking services, including investment banking functions, through different policy options, becomes an important research question. The present study aims to understand whether incorporating investment bank functions within development banks, and providing these functions to small and medium-sized enterprises (SMEs) at more accessible and affordable ways would be a good and effective economic policy tool. Towards this aim, the following sub-section provides a review of the financial system in modern economies as a background analysis for the research problem and also discusses the background of the current study Qatar Investment Activities Sample Essay.

1.1 Background of the Problem

The financial systems are composed of many players including central banks, financial regulatory and supervisory authorities, commercial banks, investments banks, mutual funds, hedge funds, pension funds, insurance companies, commodity traders, and sovereign wealth funds. This sector has displayed significant growth in the last four decades, where neoliberal policies dominated the global economy (Harvey, 2007; Palley, 2016). Figure 1 shows the evolution of the assets of the financial system globally. It is seen that the asset size of the sector was less than 100% of the global gross domestic product (GDP) in the 1960s and 1970s and displayed very limited growth until the early 1980s. However, as countries switched to neoliberal policies in the early 1980s, like Thatcherism in the United Kingdom (UK) and Reagans in the United States (US), they deregulated and liberalized financial markets significantly (Evans, 2018; Gledhill; 2018). This process facilitated the strong growth of the financial system Qatar Investment Activities Sample Essay. It is seen from Figure 1 that in the three decades from the mid-1980s to mid-2010s, the asset size almost quadrupled from 100% of gross domestic products (GDP) to 400%. When the details of the graph are examined, it is seen that the banking sector has increased from around 50% of the world gross domestic products (GDP) to more than 200%. In addition, superannuation and managed funds also increased their size significantly in the same period.

Figure 1: Asset Size of the Financial Institutions (% of the World GDP)

Chart, bar chart, histogram                                                                                                                                                                                                                                                                                        Description automatically generated

Source: Ellis (2016).

One of the leading players in the financial system are the central banks. They are responsible for the management of the monetary policy. While the roles of central banks changed significantly since their inception (like war finance in the 19th century or more passive roles during the Keynesian era in the post-war period) (Vernengo, 2016), the modern central banks usually have dual mandates of providing price stability and contributing to economic stability (such as potential growth and employment) (Debortoli et al., 2019). In addition, the global financial crisis of 2008-2009 showed that financial markets had major problems of instability. Thereafter, central banks assumed financial stability roles in the last decade as well (Taylor et al., 2019) Qatar Investment Activities Sample Essay.

Commercial banks are also important players in modern financial systems in terms of their asset sizes. They are the main financial institutions providing the basic intermediary functions of finance. In other words, savers put their savings as deposits to the commercial banks, and then, banks give these funds to borrowers as loans. As a result, the main deposit and creation mechanisms work through the commercial banking sector. In this context, McLeay

et al. (2014) state that “Commercial banks create money, in the form of bank deposits, by

making new loans. When a bank makes a loan … it credits their bank account with a bank

deposit … at that moment, new money is created” (p.16). While the central banks have some control over money creation by changing the reserve requirements and interest rates, the commercial central banks also play a critical role in this process Qatar Investment Activities Sample Essay.

In addition to money creation, one of their fundamental functions is to the allocation of funds from savers to borrowers. It would be very difficult for individual economic players to write loan contracts with each other in a bilateral way. The commercial banks, therefore, provide economies of scale, economies of scope, and the relevant expertise and skills regarding financial transactions. In this way, they play a fundamental role in the smooth function of the economy and financial transactions. In this process, commercial banks also conduct maturity transformation. Namely, they mostly collect short-term deposits and provide long-term credits like mortgage credits for house purchases or investment credits for real sector firms (Freixas & Rochet, 2008). Regarding the benefits of such financial sector intermediation and financial development, Roubini and Sala-i-Martin (1992) find that repressing the activities of commercial banks would lead to lower growth. Consistent with this finding, Levine (2015) shows that financial development (usually measured by the credit size of the commercial banks) is positively associated with economic growth Qatar Investment Activities Sample Essay.

The commercial banks also play important roles in terms of decreasing information asymmetries in the financial sector. As they give loans to borrowers, they follow the economic activities of firms and the financial health of their clients. In this way, they accumulate information about savers and borrowers and limit the size of asymmetric information in the market (Freixas & Rochet, 2008). Without commercial banks, it would be very difficult for individual economic players to collect information about their counterparts and enforce contracts. Overall, the money creating process, efficient allocation of resources from savers to borrowers, maturity transformation, risk management, and containing asymmetric information stand out as important functions of commercial banks in the modern financial systems.

However, while such functions are crucial for the efficient functioning of modern economies, it should also be acknowledged that the operations of the commercial, and also the investment, banks can lead to financial instabilities. The excessive risk-taking, over lending, and lax credit standards have been instrumental in the materialization of the global financial crisis, and they show that the banking sector can behave in very risky ways (Bruno & Shin, 2015, Ellis, 2016) Qatar Investment Activities Sample Essay. As a result, stronger regulation and financial stability policies of central banks are required to contain risky behavior of banks.

Overall, the financial system is composed of many different players. The central banks, commercial banks, and investment banks stand out as leading players that fulfil crucial functions in the modern financial system. Central banks are responsible for monetary and financial stabilities. They use different tools like short-term interest rates, liquidity operations, quantitative easing, and forward guidance to achieve these objectives. Central banks function as public regulators and market makers in the financial system. Commercial banks play important roles in the smooth functioning of economic and financial activities. They facilitate the money creation process by deposit-taking and credit-giving activities. Their fundamental role is to pool the funds of savers and to allocate them to creditors Qatar Investment Activities Sample Essay. In this process, commercial banks also do maturity transformation and risk management. Investment banks operate on different segments of the financial system, like giving financial advice, helping M&As and IPOs, and underwriting securities. Overall, the central, commercial, and investment banks provide very crucial roles in the financial system and complement each other.

1.2. Background of the Study

Given that small and medium-sized enterprises (SMEs) face significant challenges in their access to finance and higher costs of finance, governments devise different policies to ease these constraints (Hew, 2004; Storey, 2006; Hertog, 2010; Castillo et al., 2010; Tsuruta, 2020). These policies include various measures like subsidized lending to small and medium-sized enterprises (SMEs) (direct or through the banking sector), tax cuts, training for their workforce, and different advisory services. While these policy measures are found to be very important for the viability, success, and profitability of small and medium-sized enterprises (SMEs), there are still some services and products that small and medium-sized enterprises (SMEs) cannot get enough access to. For example, the investment banking services can be too costly for small and medium-sized enterprises (SMEs) and governments do not usually provide such services Qatar Investment Activities Sample Essay. Assuming that the investment banking functions produce economic and business value-added, the limited access of small and medium-sized enterprises (SMEs) to these functions can be considered as important constraints on the economic performance of small and medium-sized enterprises (SMEs) in particular and the overall economic development in general. This is a research and policy area that is not studied sufficiently in the academic and policy circles. The presents study aims to fill the existing research and policy gap by examining the question of whether incorporating investment bank functions into toolset of development banks would be a good and effective policy measure to support small and medium-sized enterprises (SMEs) and economic development Qatar Investment Activities Sample Essay.

This study examines the relevant research question using a survey of small and medium-sized enterprises (SMEs). Towards this purpose, an online questionnaire is formed, which is targeted at the small and medium-sized enterprises (SMEs) regarding their use of development bank facilities and their perceptions on the possible provision of investment bank facilities. In this way, primary data is collected directly from the small and medium-sized enterprises (SMEs). The collected data is then analyzed using both descriptive and quantitative methods. In the descriptive methods, each survey question is discussed in detail, while in the quantitative methods part the relationships between questions are examined using statistical methods. The collected data and the relevant research evidence are expected to shed light on the research questions in terms of whether incorporating investment bank functions into the toolset of development banks and providing these functions to the small and medium-sized enterprises (SMEs) at more accessible and affordable ways are good policy options Qatar Investment Activities Sample Essay. In that sense, the present study has strong policy implications. As the survey data support the argument that the small and medium-sized enterprises (SMEs) would benefit from the investment bank functions, the results present a case for incorporating these functions to the portfolio of development banks. This policy measures would create a new and valuable dimension on the small and medium-sized enterprises (SMEs) policies and programs provided by development banks and governments.

The structure of the present study is as follows. The second chapter presents the objectives of the study, which includes the problem statement and hypothesis development. The research questions, along with research limitations, are also discussed in the second chapter. The third chapter gives a detailed literature review. The chapter discusses the roles and functions of investment banks in the modern economy and how they create value-added for the businesses and the overall economy. There is some focus on how small and medium-sized enterprises (SMEs) can benefit from investment bank functions Qatar Investment Activities Sample Essay. The chapter also reviews the role of small and medium-sized enterprises (SMEs) in the economic development of both advanced and developing countries. The role of small and medium-sized enterprises (SMEs) in the Qatar economy is also examined in the third chapter. The discussion includes the role of government policies and development banks in supporting small and medium-sized enterprises (SMEs) activities. The fourth chapter presents the details of the primary data collection process, including methodology, research design, research execution, and methods of data analysis. The fifth chapter gives a detailed analysis of the empirical findings in terms of hypothesis testing and the intermediary conclusions. Finally, the last chapter concludes the study and makes pertinent recommendations Qatar Investment Activities Sample Essay.

Objectives of the Study

The core mandate of investment banks is to provide a range of specialized financial services to the industrial, service, and manufacturing sectors. These services can be summarized in services related to advisory functions, Mergers & Acquisitions (M&As), Initial Public Offerings (IPOs), and Underwritings of Stocks. They are crucial to the increase in the overall output of the economy (Bao & Edmans, 2011; Stowel, 2017; Mazzucato and Penna, 2015). In a similar fashion, the development banks provide finance to the public and private sector, and therefore they are critical to the growth of industries within the economy as well (De Luna-Martínez & Vicente, 2012). Small and medium enterprises depend upon these banks for growth and development, and as such, development banks ought to have an investment function that is focused on the SMEs (Levitsky, 1997; Griffith-Jones et al., 2011; Anton, 2013; Mertens &Thiemann, 2018) Qatar Investment Activities Sample Essay.

The association between development banks and small and medium-sized enterprises (SMEs) should be one that adds value to these business organizations. Indeed, there is a need for banks to create investment functions that are geared towards the development of small and medium-sized enterprises (SMEs). This is due to the fact that small and medium-sized enterprises (SMEs) tend to face several unique difficulties, unlike a large corporation that has a strong business foundation and experiences (Stefanovic et al., 2009). small and medium-sized enterprises (SMEs) need financial support and mentorship that can only be best offered by development banks. For this reason, it is of absolute necessity that all development banks should have an investment function for offering better financial services to Small and Medium Enterprises Qatar Investment Activities Sample Essay.

This study is crucial because it shall demonstrate the importance of development banks having investment functions and how small and medium-sized enterprises (SMEs) can benefit from the same. It endeavors to show the various needs that small and medium-sized enterprises (SMEs) have and how a bank’s investment functions are able to address

those needs. Furthermore, this research attempts to marry a development bank’s investment function with the growth and development of these businesses (Zairani & Zaimah 354). Indeed, there is more to the wellbeing of an small and medium-sized enterprise (SME) than merely having a good source of finance, and in the process of growth and development, these enterprises might require offering an initial public offer, merge or acquire other businesses, conduct risk management, conduct research on the worthiness of the company and also be involved in business consultancy (Stefanovic et al., 2009). Certainly, a development bank with these functions is ideal for small and medium-sized enterprises’ (SMEs’) development Qatar Investment Activities Sample Essay.

Key to this research is the inclusion of a discussion on how investment functions help small and medium-sized enterprises (SMEs) to grow from the position they are into large corporations. The truth is that the growth of an organization into a major corporation is an intricate process that has many hurdles. Critical among these obstacles is the merger and acquisition of businesses in the process of growth (Gomes, 2018). A bank with an investment function has the power and ability to step in for small and medium-sized enterprises (SMEs) and take them through this process successfully. Development banks can focus on providing specialized advice and strategy for small and medium enterprises on how to carry out mergers and acquisitions in the process of their growth Qatar Investment Activities Sample Essay.

Banks that have investment functions are also critical to ensuring that businesses can initiate their Initial Public Offering at the right time, depending on the economic conditions of a country. The present research expounds on the need for small and medium-sized enterprises (SMEs) to partner with banks that have an investment function for conducting a successful initial public offering (IPO) (Jenkinson, 2018). Indeed, it is such banks that have the power to attract the right investors by offering legitimacy to the operations of such organizations. Development banks are essential in helping small and medium-sized enterprises (SMEs), which are often lacking in the knowledge of the importance of conducting an initial public offering (IPO) and the right strategies that they need to take henceforth (Jenkinson, 2018). This paper, therefore, demonstrates why banks that do business with small and medium-sized enterprises (SMEs) need to have an investment function if these businesses are to succeed Qatar Investment Activities Sample Essay.

Based on the implementation theory, this research shows the need for certain activities that need to be carried out if small and medium-sized enterprises (SMEs) are to experience success in business. Effective planning is critical to the implementation theory. Indeed, this research demonstrates how an investment function is needed in development banks that do business with small and medium-sized enterprises (SMEs). Certainly, the implementation theory provides a framework for the discussion on why banks ought to have an investment function (Smith, 2013). Consequently, this research also looks at the change process theory for the explanation of how investment function can benefit small and medium-sized enterprises (SMEs) (Weiner, 2020). This second theory provides the basis upon which investment functions can be measured for effectiveness in causing businesses to grow and develop Qatar Investment Activities Sample Essay.

Other factors that are discussed in this research include how investment functions in banks facilitate the issuance of derivatives and restructuring. Banks are vital in designing derivatives for small and medium-sized enterprises (SMEs) that are key to attracting investors who are keen on maximizing the return on their investments. Other investment banking functions such as those that deal with leading small and medium-sized enterprises (SMEs) to undertake investments in the money market, stock brokering, and project management and others are of paramount importance as well (Werner, 2014). Additionally, other functions, such as business management, are also discussed in the present study. In the end, this research shall provide recommendations that will help development banks to establish investment functions to help small and medium-sized enterprises (SMEs) to grow and, at the same time, highlight the need for small and medium-sized enterprises (SMEs) to work with banks that have elaborate investment functions Qatar Investment Activities Sample Essay. Based on these discussions regarding the rationale and motivation for the present study, the following sub-sections present the problem statement, the study objectives, hypothesis statement, additional research questions, and research limitations.

Problem Statement

This research is focused on showing how the absence of investment banking functions in some development banks that are focused on providing financial services to small and medium-sized enterprises (SMEs) has an impact on their growth and development. As such, this research intends to focus on solving this problem by encouraging development banks to formulate investment functions in order to serve small and medium-sized enterprises (SMEs) better. For this reason, this research is based on the following problem statement. Poor development of small and medium-sized enterprises (SMEs) is partially due to the absence of investment banking functions in most development banks that offer financial services to businesses. Therefore, the progress of small and medium-sized enterprises (SMEs) is dependent on the initiation of investment banking functions in these financial institutions. In other words, if investment bank functions are to be included in the toolset of development banks and these functions are to be provided to small and medium-sized enterprises (SMEs) at more affordable and accessible ways, the potential of small and medium-sized enterprises (SMEs) in particular and economic development, in general, could be improved significantly. Given that small and medium-sized enterprises (SMEs) are the engines of economic growth and job creation in many countries, supporting their potential through new policies and programs would be very valuable government policies. Therefore, the current study focuses on the research problem of

incorporating investment bank functions into the portfolio of development banks and providing these services to small and medium-sized enterprises (SMEs) at more affordable and accessible ways.

2.2 The need for fundraising for small and medium enterprises

Different scholarly studies have dissect that micro and small enterprise sector plays an important role in boosting economy and contributing to the development of a country. According to A Reliance Capital Money (2017), there are 42.50 million micro and small enterprises. These registered and unregistered micro and small enterprises employ 40% of employees. It takes a lot of hard work for these micro and small enterprises to run, and grow Qatar Investment Activities Sample Essay. Money is the backbone of any business, and money supply is important. Lack of funds during the first year of operation were the main reasons for small and medium-sized enterprise (SME) and closure. There are several reasons why an small and medium-sized enterprise (SME) can raise money for a business

Expansion

The key to raising money as a trader is to expand and grow over the next two years. Financial support is needed to increase the capacity of the business in terms of raw materials, infrastructure, institutional expansion, marketing and promotion.

Property purchase

Property is the cornerstone of any business. Fundraising, equipment, land, buildings, etc. can help ease the purchasing process.

Accelerates work

Fundraising is important for the business as it helps to speed up the process by providing capital for the day-to-day operations. Other costs include staff salaries, warehouse maintenance, storage facilities, production and transportation, transportation, and so on.

Debt recovery

At one time or another, a business could be in financial trouble. Debt settlement can save lives in such situations. Basically, it reduces the amount of debt and rebuilt it and reduces the burden on an entrepreneur. There are different ways for small and medium-sized enterprises (SMEs) – private roads and public fundraising. It is important to live in the same way. A company can raise money in a variety of ways:

Banks and NBCs – Both public and private banks, as well as the NBC, offer lucrative lending institutions and can certainly get some help. However, it is important to go through the various procedures, go through the documents and make sure the sponsor is healthy in your business.

Friends and relatives – Getting help from friends and relatives to grow your business is truly profitable. Dependence and transparency on limited costs come here. It also allows you to spend more time without worrying about credit McLeay & Radia et all (2014).

Public support – Fundraising for many involves raising money with the help of many people, especially for creative business planning, social issues, etc. In recent times, many ideas have prospered. If you are confident in your business potential and think it will be a good outcome for the community, you are more likely to raise public funds. Persuading people and estimating your goals will definitely help you a lot Qatar Investment Activities Sample Essay.

Objectives of the Study

The main objective of the present study is to show the potential positive effects of incorporating investment bank functions into the toolset of development banks. In this way, the development banks can provide an additional set of services and products to small and medium-sized enterprises (SMEs), and in return, the growth and productivity potential of these firms would be improved. To support the main objective, the study also aims to display to what extent the small and medium-sized enterprises (SMEs) utilize development bank services and finance and whether they value these services positively. One additional objective of the study is to document the relationship between small and medium-sized enterprises (SMEs) and development banks. In addition, the perceptions of small and medium-sized enterprises (SMEs) towards the investments banking functions like advising, mergers and acquisitions (M&As), and initial public offerings (IPOs) are scrutinized in the study. In this way, one of the objectives of the present study becomes to identify the perceptions of the small and medium-sized enterprises (SMEs) regarding the investment bank functions. This objective also aims to understand how positive small and medium-sized enterprises (SMEs) are towards the inclusion of investment bank functions into the portfolio of development banks and whether small and medium-sized enterprises (SMEs) would benefit from these functions, services, and products. Overall, the present study involves a set of objectives connected to each other, as discussed above.

Hypothesis Statement

The above discussions regarding the motivation and rationale for the research problem indicate that the present study aims to understand whether the inclusion of investment bank functions in the portfolio of development banks would create value-added for small and medium-sized enterprises (SMEs) and support economic development. Towards this research aim, the main research hypothesis of the present study can be presented as follows:

Null Hypothesis: H0: Implementation of investment banking services by development banks such as Mergers & Acquisitions, Investment Valuation, and Public and Private Placement will not create value for their small and medium-sized enterprises (SMEs) customers Qatar Investment Activities Sample Essay.

Alternative Hypothesis: Ha: Implementation of investment banking services by development Banks such as Mergers & Acquisitions, Investment Valuation, and Public and Private Placement will create value for their small and medium-sized enterprises (SMEs) customers

Additional Research Questions

The main research question of the present study is whether incorporating investment bank functions into the portfolio of development banks would create value for small and medium-sized enterprises (SMEs). In order to study this research question, the present study also examines additional research questions. One such question is about the nature and characteristics of the relationship between small and medium-sized enterprises (SMEs) and development banks. Namely, this research question can be stated as follows “To what

extent do small and medium-sized enterprises (SMEs) utilize development bank facilities?”. In addition, another additional relevant question becomes “How valuable are the development bank facilities for small and medium-sized enterprises (SMEs)?”. Moreover, the present study aims to understand the perceptions of small and medium-sized enterprises (SMEs) regarding the inclusion of investment banking functions in the portfolio development banks. In this regard, another additional research question is given as follows: “How do small and medium-sized enterprises (SMEs) perceive the inclusion of

investment banking functions in the portfolio development banks?”. Overall, the main research question and the surrounding additional research questions provide a comprehensive perspective on the research topic of the present study Qatar Investment Activities Sample Essay.

Research Limitations

The present study suffers from several research limitations that can be addressed in future research. One mild research limitation is the relatively moderate sample size. In the survey of small and medium-sized enterprises (SMEs), the answers are collected from 76 firms. This size can be considered enough to produce initial insights on the potential role of investment banking functions for small and medium-sized enterprises (SMEs). However, increasing the sample size still would be useful to improve the robustness and the generalizability of the findings. As a related extension, the coverage of small and medium-sized enterprises (SMEs) can be broadened in terms of geographical area, so that the perspectives of small and medium-sized enterprises (SMEs) from both advanced and developing countries can be collected. Another research limitation is the use of a cross- sectional survey of consumers. Namely, the online questionnaire collects information on the relations between the small and medium-sized enterprises (SMEs) and development banks, along with the perceptions of small and medium-sized enterprises (SMEs) regarding the inclusion of investment banking functions by the development banks and

whether small and medium-sized enterprises (SMEs) would benefit from such services and products. However, the questionnaire is conducted once with no follow-up questionnaire following the perceptions of small and medium-sized enterprises (SMEs). Having a time dimension in the study would be valuable to collect dynamics information on the evolving relationships of small and medium-sized enterprises (SMEs) with development banks and their perceptions on the investment bank functions Qatar Investment Activities Sample Essay. Therefore, extending the analysis on the time dimension and obtaining a panel data of answers would be a valuable research extension in future research. Yet another research limitation is about the nature of the survey questions and answers. In order to avoid data security and privacy issues, the survey did not collect any information on the balance sheets or income statements of small and medium-sized enterprises (SMEs). In this way, the survey participants can feel more comfortable to complete the online questionnaire. However, the lack of hard data on firm characteristics (like size and age of the firm or its relationship with development banks in some numbers) limits the scope of the quantitative analysis. Instead, having such secondary data on firms’ balance sheets and income statements would be valuable to produce more detailed empirical evidence on which types of firms would consider the investment banking functions valuable and helpful. Again, this kind of data can be collected and examined in future research.

Literature Review

Introduction

This chapter presents a detailed literature review regarding the research question. The review is conducted under three parts. The first part discusses the importance of small and medium-sized enterprises (SMEs) for economies. Their growth and employment generation capacities are examined. In addition, the problems facing small and medium-sized enterprises (SMEs) like access to finance and credit constraint issues are reviewed in that part. The second part reviews the role of investment banks for economies and how they create value- added for the economy and businesses. Finally, the last part presents the key takeaways from the literature review and tries to connect the investment banking functions and the needs of small and medium-sized enterprises (SMEs) Qatar Investment Activities Sample Essay.

The Importance of small and medium-sized enterprises (SMEs)

The Small and Medium-Sized Enterprises (SMEs) are the backbones of economies with their high share of employment generation and with their dynamism. Many start-ups and high growth firms usually start as small and medium-sized enterprises (SMEs), and they experience strong growth with their innovation and comparative advantages in new niche areas. Even though small and medium-sized enterprises (SMEs) produce later on many successful and enduring firms, they also face numerous problems like their short duration in the markets and lower productivity. Moreover, they can have problems in terms of accessing to financial resources, obtaining skilled labor force, finding customers, competition pressures, regulation, and cost of labor. Given the importance of small and medium-sized enterprises (SMEs) for national economies and the myriad of problems that they face, governments also design policies to help small and medium-sized enterprises (SMEs) towards easing their problems. For example, governments can facilitate subsidized borrowing by development banks for small and medium-sized enterprises (SMEs) to ease their financial constraints, can provide government- sponsored training programs to increase the skill level of the labor force, and can provide export credits to increase their competitiveness in international markets.

Given the importance of small and medium-sized enterprises (SMEs) in many countries, these firms also matter for different dimensions of economic development. For example, Cernat et al. (2014) argue that small and medium-sized enterprises (SMEs) have an important role in the exports of European countries Qatar Investment Activities Sample Essay. The authors find that around 80% of exporter firms are small and medium-sized enterprises (SMEs) and these firms account around 33% of total exports. However, they

also find that this performance varies greatly across European countries, and effective trade policies would be needed in some countries to increase the export performance of small and medium-sized enterprises (SMEs). The European Commission (2011) also examines the international business practices of small and medium-sized enterprises (SMEs) in Europe and finds that around 30% of SMEs have some international economic activity abroad. The exporting small and medium-sized enterprises (SMEs) report that they face some barriers to international economic activities in terms of risk of getting payment, bureaucratic hurdles, and difficulty of adequate finance.

Access to finance, therefore, can be an important issue even for exporting firms. The report notes that government support to small and medium-sized enterprise (SME) exporters increases the economic performance of these firms Qatar Investment Activities Sample Essay.

Abel-Koch et al. (2015) examine the investment and innovation behavior of small and medium-sized enterprises (SMEs). The authors emphasize that given the comparative advantage of firms in developing countries in terms of lower costs, it is imperative for European firms to focus on reputation, innovation, and quality. Using data for France, Germany, Italy and Spain, they find that small and medium-sized enterprises (SMEs) with higher investment rates and more active innovation activities have better economic performance and higher international competitiveness indicators. Additionally, the authors note that finance difficulties form important obstacles to both investment and innovation activities and propose implementing related policies. A similar proposal for economic policies targeting small and medium-sized enterprises (SMEs) in Europe is suggested by some papers like Floyd and McManus (2005) as well.

Regarding the employment performance of SMEs, de Kok et al. (2011) study the quantity and quality of jobs created by the small and medium-sized enterprises (SMEs). The authors state that between 2002 and 2008, 85% of net jobs created in European countries originated from small and medium-sized enterprises (SMEs). Given that the employment share of small and medium-sized enterprises (SMEs) is around 65-70%, this larger than proportionate increase in employment growth implies that small and medium-sized enterprises (SMEs) create more jobs than large firms. Most of this positive growth effect comes from the creation/entering of new firms as small and medium-sized enterprises (SMEs). However, the authors also note that the quality of jobs created by small and medium-sized enterprises (SMEs) in terms of salaries, flexibility, security, training, on-the-job learning and skill accumulation is not as high as in the case of large firms and propose related economic policies in these dimensions Qatar Investment Activities Sample Essay.

Another area that attracted great attention in academic, policy and business circles related to small and medium-sized enterprises (SMEs) is the credit constraints that these firms face. For example, Bremus (2015) notes that the majority of small and medium-sized enterprises (SMEs) depend on loans from the banking sector and this channel was hampered significantly during the financial crises of 2008-2009, and the European sovereign debt crises of 2011-2012. Artola and Genre (2011) find that small and young firms face higher credit constraints during the crises, while Ferrando and Griesshaber (2011) show that ownership also matters in access to finance. Then, Bergthaler et al. (2015) suggest that related credit and finance policies aimed at financially constrained small and medium-sized enterprises (SMEs) become important economic policy areas.

A specific area related to the credit constraints of firms is its growth effects. Due to the fact that small and medium-sized enterprises (SMEs) form the basis of economic growth and employment creation, the conditions under which credit constraints restrict the growth of these firms attracted significant research and policy interest. For example, Beck and Demirguc-Kunt (2006) note that small firms face higher growth restrictions and experience significant problems to access to finance both in developed and developing countries. The authors find that institutional progress and financial development ease these constraints of small firms. Additionally, specific finance instruments in terms of finance and leasing also improve access to finance and other arrangements like mechanisms for sharing credit score/information facilitate this process.

Regarding the growth effects, Campello et al. (2010) use data for large corporations with a sample size of 1,050 firms. They specifically examine the behavior of the firms around the global financial crisis. The authors show that credit-constrained firms were affected more negatively from the crisis. These firms decreased investment expenditure, and technology- related outlays much more than unconstrained firms. Additionally, they cut their workforce as well as dividend payments again more than the other firms. These differences imply that constrained firms were not able to smooth the negative effects of the global financial crisis using financial markets. Normally, economic theory suggests that firms would use credit facilities to smooth such adverse events. However, as constrained firms face significant problems in accessing finance, this restriction leads them to feel the impact of negative events more sharply, with important growth consequences Qatar Investment Activities Sample Essay.

There are some further works looking at the growth effects of financial constraints. For example, Ferrando and Mulier (2015) examine the case of firms in 9 European countries in the

four years following the global financial crisis. The authors have a specific way to determine the financial constraint of firms. They specifically examine the ones that do not apply to financial institutions for a loan because of the fear of rejection. These firms would be possibly facing very extreme financial constraints and using their data can allow better identification of the financial constraint effects. Ferrando and Mulier (2015) find that constrained firms face significant negative effects on investment, employment and asset growth. Additionally, the authors show that higher interest rates also lead to higher discouragement. This finding might imply that financially constrained firms would be more negatively affected by the tightening of monetary policies. Similarly, Coluzzi et al. (2015) look at the effects of financial constraints on growth for five European countries, namely Spain, Portugal, Italy, Germany and France. The authors use both balance sheet and survey data and find that financial constraints affect firm growth negatively Qatar Investment Activities Sample Essay.

Ferrando and Griesshaber’s (2011) work is one of the first studies using detailed survey data set to examine credit constraints for small and medium-sized enterprises (SMEs) in Europe. The authors use probate and multinomial logit regression analysis as they have the firm-level data. Their dependent variable is the answer that the most pressing problem facing the firm is access to finance. After detailed analysis, they find that young small and medium-sized enterprises (SMEs) face a higher level of credit constraints while the effect of size is indeterminate. Regarding the impact of size on other factors, the authors note that “firm size becomes important to explain the choice of different sources of finance with larger firms having a preference (or the possibility) to draw more on external funds, which itself appears strongly related to the experience of finance obstacles” (p.18).

In another study, Ozturk and Mrkaic (2014) study the factors that affect the SMEs’ access to finance in Europe using the same survey data set. The authors use an ordered logit model to examine whether risks in the banking sector or the balance sheets of firms would lead to higher problems related in access to finance for small and medium-sized enterprises (SMEs). To measure the risk in the banking sector, the authors use credit default swap (CDS) premiums in each country, while they use the change in debt-to- asset ratios as a proxy for balance sheet problems. Then, they find that “an increase in bank funding costs is negatively associated with firms’ access to finance, though only in stressed

economies” and “that those firms that reported an increase in their debt to assets ratios are

significantly more likely to report deterioration in their access to finance, regardless of firm size, the sector, and of whether they are located in the stressed economies or the rest” (p.4). In this fashion, the authors get supportive evidence for their hypotheses. Moreover, they find that both size and age are positively related to access to finance; in other words, larger and mature firms face fewer credit constraints.

Figure 2: Most Pressing Problems Faced by Euro Area SMEs (% of respondents)

Chart, table, Excel, histogram                                                                                                                                                                                                                                                                                        Description automatically generated

Source: ECD (2016).

To show the relevance of access to finance and other problems for small and medium-sized enterprises (SMEs), Figure 2 above shows the most pressing problems faced by Euro Area small and medium-sized enterprises (SMEs), obtained from the simple agreement for future equity (SAFE) database (ECB, 2016). The figure shows that access to finance is the most pressing problem for around 15% of small and medium-sized enterprises (SMEs), and it is the third most common problem after finding customers and competition Qatar Investment Activities Sample Essay. Moreover, the intensity of access to finance problems varies with the size of the firms. This problem is most acute for micro firms and eases as the firm size moves from small to medium and to large firms.

Overall, the small and medium-sized enterprises (SMEs) have a significant share in many countries in terms of the number of enterprises, the total number of employees and total value-added. Additionally, studies show that small and medium-sized enterprises (SMEs) are responsible for a larger share of net employment creation, around a third of them participate in international business activities, and more innovative ones are also the more profitable and competitive firms. small and medium-sized enterprises (SMEs) are shown to be affected by financial constraints in terms of growth. Namely, constrained firms have lower output and employment growth.

Given the important role of small and medium-sized enterprises (SMEs) in the economy, most of the related studies point to the need for properly designed policies, including financial policies aimed at easing credit constraints and access to finance.

The Role of Investment Banks

Investment banks are also important players in the modern financial system. They are not directly in the deposit-taking or credit giving activities but focus on other dimensions of the

financial sector. Regarding these roles, Maverick (2019) states that “Investment banks serve a number of purposes in the financial and investment world, including underwriting of new stock issues, handling mergers and acquisitions, and acting as a financial advisor. Other roles of investment banks include asset management for large investment funds and personal wealth management for high-net-worth individuals”. In the United States (US), the 1933 Glass-Steagall Act separated commercial and investment banking activities to avoid conflicts of interest and possible financial instability issues (Kroszner & Rajan, 1994). However, this act was repealed in 1999 within the context of financial market deregulation. So, commercial banks also started providing financial investment purposes Qatar Investment Activities Sample Essay.

The investment banks operate on a different segment of the financial system and fulfil important functions. For example, they provide advice to companies on when and at what price to issue securities. Similarly, the help firms in the process of initial public offerings. They are also the underwriters of the global debt and equity markets. For example, when governments and large corporations want to borrow in international markets, investment banks play the role of intermediaries in this process and bring borrowers and investors together. They also facilitate mergers & acquisitions (M&As) transactions and equity sales. Hence, investment banks fulfil important functions for the efficient workings of modern economies. However, their behavior, such as excessive risk-taking (such as the collapse of Lehman Brothers) and the spread of financial innovation in toxic ways (such as the risk increasing features of credit default swaps (CDSs) and CDOs) can be dangerous. Therefore, the regulation of investment banking activities is also very crucial for financial stability

(Blundell-Wignall & Atkinson, 2011).

The literature on the role and positive effects of investment banks are quite large. For example, Servaes and Zenner (1996) examine the role of investment banks in acquisitions. The authors examine numerous acquisitions in the 1981-1992 periods. Some of these acquisitions involved investments, while the rest did not involve any investment banks. The results indicate that as the complexity of acquisitions increased, there was a higher likelihood of an investment bank being involved. So, in the cases that the relevant companies do not have the necessary capacity in terms of managerial, technical, and human capital, they get the services of

investment banks Qatar Investment Activities Sample Essay. In this context, Walter et al. (2008) state that “High-quality advisers also complete deals faster … high-quality investment banks are able to differentiate themselves by delivering greater abnormal returns to their acquirer clients in deals involving stock” (p.341). This finding implies that small and medium-sized enterprises (SMEs) might benefit from investment banking services if they want to get involved in mergers and acquisitions. Since small and medium-sized enterprises (SMEs) usually have limited technical and human capital capacity, they would be deterred from getting involved in complex business strategies. In addition, high fees of investment banks could be an obstacle deterring small and medium-sized enterprises (SMEs) to seek the advice of investment banks. Then, the provision of investment banking functions at more affordable and accessible ways under development banks emerges as an important policy dimension. A similar positive role of investment banking is displayed in the public equity markets as well. Dai et al. (2010) show that more reputable and efficient investment banks increase the success of issues in the private investment in public equity markets. So, through the services of investment banks, companies can get favourable finance at better rates. This dimension of investment banks can also be another important benefit of these banks, and it can be argued that these benefits would be useful for small and medium-sized enterprises (SMEs) as well. Similar benefits of investment banks can be observed in the initial public offering (IPO) strategies (Binay et al., 2007). Overall, investment banks provide important services to the real sector and create significant value-added. However, their services can be too expensive for small and medium-sized enterprises (SMEs). Therefore, improving the access of small and medium-sized enterprises (SMEs) to these investment banking functions emerges as an important research and policy area Qatar Investment Activities Sample Essay.

Given the widely acknowledged benefits of the investment banks, it can be argued that small and medium-sized enterprises (SMEs) can also benefit greatly from the services and products of these banks. There is no detailed literature on this dimension, i.e., the utilisation of investment banking functions by small and medium-sized enterprises (SMEs). So, the current study aims to fill this research and policy gap by collecting primary data on the question and by collecting primary data on the topic and conducting some quantitative analysis on the collected data.

Summary of Key Points

This chapter provides a detailed literature review of the importance of small and medium-sized enterprises (SMEs) for many advanced and developing countries. Findings indicate that small and medium-sized enterprises (SMEs) are the engines of economic growth. In addition, they are responsible for an important segment of business investments and exports, as well as the large majority of employment growth. Therefore, the health and growth of small and medium-sized enterprises (SMEs) matter greatly for the overall economic performance and development of countries Qatar Investment Activities Sample Essay.

However, the literature also shows that small and medium-sized enterprises (SMEs) face significant challenges, especially on the finance dimensions. As a separate key finding, investment banks are found to play important roles in modern economies, and they provide significant value-added for businesses and the overall economy. Then, combining these research areas can present new opportunities for small and medium-sized enterprises (SMEs).

Collection of Primary Data

This chapter presents the details of the primary data collection and the methodological approach followed in the study, along with the sample properties, research execution, and analysis of the data.

Methodology

The proper choice of research methodology and its effective execution are very crucial in academic research. Proper implementation of a research project would require the conduct of an appropriate methodological process. In social sciences, there can be several characteristics of a research methodology such as being deductive vs. inductive, or qualitative vs. quantitative, and others (Saunders et al., 2009). Determining the appropriate research process becomes crucial to address the research question effectively. The initial steps of the research process involve the decisions on research philosophy and research approach. Saunders et al. (2009) note that the common choices in the research philosophy dimension include positivism, realism, interpretive, and pragmatism. The current study follows a positivist research philosophy. This choice is also consistent with the objectivist research philosophy. The topic of the current research is about the incorporation of investment banking functions under development banks and how this strategy can help small and medium-sized enterprises (SMEs) improve their performance. As discussed in the literature review chapter, there are many theoretical and empirical works on small and medium-sized enterprise (SME) issues and problems. The literature is also able to establish some widely accepted facts like the credit constraint that small and medium-sized enterprises (SMEs) are facing and how these constraints limit the growth of small and medium-sized enterprises (SMEs). Similarly, the value-added of the services provided by the investment banks are widely acknowledged in the literature. Therefore, a positivist research philosophy becomes the relevant philosophy to follow in the current approach.

Research Design

After determining the broader characteristics of the research process like research philosophy, the next steps of the research process involve more practical dimensions like the research design and strategy. Saunders et al. (2009) note that on the research strategy dimension, there are various options like experiments, surveys, case studies, action research, grounded theory, ethnography, and archival research Qatar Investment Activities Sample Essay. The specific choice of the research strategy depends on the characteristics of the research process and the scope of the study. It is possible that more than one research strategies would be suitable for many research topics. For example, the researchers can use a case study to examine the importance of investment banking functions for small and medium-sized enterprises (SMEs) or employ secondary data to check how the characteristics of SMEs are related to their utilization of different financial services and products. Both approaches would be appropriate, and the specific choice would depend on the preferences of the researcher regarding the scope of the analysis.

In the current research, the survey method is chosen as the appropriate research strategy. The survey method is an effective approach to collect primary data directly from the participants. It can be conducted using interviews or questionnaires. In the case of interviews, more detailed information can be compared in a very flexible way. However, it is time- consuming, and the sample size usually becomes very limited due to feasibility constraints. In contrast, it is feasible to obtain larger samples with questionnaires as conducting them is much easier with the help of online professional survey platforms. However, one disadvantage of the questionnaires is that there is no flexibility in the questions and answers. Based on these discussions and the relevant feasibility considerations, the present study conducts an online questionnaire targeted at the small and medium-sized enterprises (SMEs).

Type of research.

The questionnaire method is used as the main research tool to obtain primary data regarding the research topic. The research problem of the current study has two dimensions. On the one dimension, the perceptions, and intentions of small and medium-sized enterprises (SMEs) matter for the proposed policy of including the investment banking functions under development banks. Namely, this dimension is interested in the demand side of these functions in terms of whether small and medium-sized enterprises (SMEs) would value such services and products and whether they would have some intentions of using them if they are provided at more feasible and accessible ways. The second dimension is on the supply side of the research topic. Namely, whether development banks would efficiently incorporate investment banking functions and whether they would face any resistance to change or some constraints like human capital or finance issues. It would be ideal to collect information on both sides of the research topic, i.e., both small and medium-sized enterprises (SMEs) and development banks. However, due to feasibility issues and given the scope of the current study, only the small and medium-sized enterprise (SME) dimension is examined in the present study. The analysis of the development bank side is left for future research Qatar Investment Activities Sample Essay.

It is the result of the development of a specific area related to corporate credit limits. As small and medium enterprises are the basis for economic growth and job creation, the growth constraints of these enterprises have attracted a lot of research and policy interest. The World Bank Group (2021) Note, for example, small companies face significant growth shortages and severe financial problems in both developed and developing countries. The authors recognize that institutional growth and financial development will reduce the limitations of these small companies. In addition, certain financial instruments in terms of finance and lease improve access to financial and other lending strategies.

McLeay & Radia et all (2014) Use data for sample companies for 1,050 companies. They examine the behavior of organizations, especially in light of the global financial crisis. The authors point out that debt-ridden organizations have suffered the most. These companies have reduced investment costs, and technology costs are much higher than unlimited companies. They also reduced their labor and profit margins more than any other company. These differences indicate that limited organizations have not been able to use the financial market to address the negative effects of the global financial crisis. Normally, economic theory suggests that corporations use credit institutions to mitigate such negative events. However, banned organizations face significant financial difficulties, and this restriction makes them more vulnerable to the consequences of negative events, resulting in significant growth consequences.

Design of the research instrument.

Regarding the design of the research instrument, i.e., the small and medium-sized enterprise (SME) questionnaire, an online questionnaire is prepared. It includes ten questions on various strategies and perceptions of small and medium-sized enterprises (SMEs) on the research topic. The survey questions are presented in the Appendix. In order to avoid any data security or privacy issues, the survey did not collect any information on firm characteristics, including balance sheet or income statement data. The first question in the survey asks, “Have you ever had relations with any development bank?”. This question aims to see if the survey participant had any close relationship with development banks and whether

they used the relevant services. Then, the second question asks, “To what extent do you agree that the functions and finance provided by the development banks are valuable for small and medium-sized enterprises (SMEs) like your firm?”. In this question, the value-added of services and finance provided by the development banks to small and medium-sized enterprises (SMEs) are examined the answer choices to this question are presented in Likert-scale variables like “1-Strongly Disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly

Agree”.

After getting information on the relationship of small and medium-sized enterprises (SMEs) with the development banks and how they value the relevant services and products, the next set of questions look at what small and medium-sized enterprises (SMEs) think about some investment banking functions. In this context, the third question asks, “To what extent do you agree that it would be useful for small and medium-sized enterprises (SMEs) like your firm to go public and get

listed in the stock markets?”. This question tries to understand whether small and medium-sized enterprises (SMEs) think that going public and getting listed in the stock markets are considered as valuable strategies. Such strategies can be somewhat complex and costly for small and medium-sized enterprises (SMEs), given their limited human capital and financial capacities. Then, they would need some external advisory help, like buying relevant services from an investment bank, to proceed with such strategies Qatar Investment Activities Sample Essay. However, it is also possible that small and medium-sized enterprises (SMEs) might prefer to stay private due to various factors like being a family business etc.

Therefore, understanding the perceptions of small and medium-sized enterprises (SMEs) on various investment banking functions is very important for the present study. As a piece of related information, the fourth question asks, “Does your firm have any intentions of going public?”. This is a direct question and tries to understand the real intentions of small and medium-sized enterprises (SMEs) in terms of going public if they have the relevant

capacities. Then, the fifth question asks, “Have you ever had relations (like underwriting services or mergers & acquisitions (M&As) activities) with any investment bank (i.e., domestic or international investment banks like Goldman Sachs or Morgan Stanley)?”. While it is expected that the relationship of small and medium-sized enterprises (SMEs) with the investment banks would be limited due to the high fees charged by these banks, it is still informative to collect information on the relationship of small and medium-sized enterprises (SMEs) with investment banks.

After collecting information on the perceptions and intentions of small and medium-sized enterprises (SMEs) in terms of going public and getting listed in the stock markets, along with their existing relationships with the investment banks, the next question collects information on what the small and medium-sized enterprises (SMEs) think about the

investment bank services. Specifically, the sixth question asks, “To what extent do you agree that the functions provided by the investment banks (like underwriting services, initial public offerings (IPOs), going public, mergers & acquisitions (M&As) intentions, data closure requirements etc.) would be valuable for small and medium-sized enterprises (SMEs) like your

firm?”. The specific investment banking functions like underwriting services, initial public offerings (IPOs), going public,

Mergers & acquisitions (M&A) intentions, and data closure requirements are examined in terms of small and medium-sized enterprise (SME) perceptions. This is one of the crucial survey questions for the main research question and the main research hypothesis. Namely, whether such investment banking functions are valued by the small and medium-sized enterprises (SMEs) can be examined using the answers to this question. The rationale for the research question and the relevant studies in the literature show that small and medium-sized enterprises (SMEs) might face access to finance problems, as well as high costs of accessing some financial services therefore examining the relevance of this dimension, i.e., whether the investment banking services are too expensive for small and medium-sized enterprises (SMEs). In this context, the seventh question asks, “To what extent do you agree that the functions provided by the investment banks are too expensive, thereby restricting the access of small and medium-sized enterprises (SMEs) to these banks and their services?”. This question collects direct information on whether the cost of investment banks is a major constraint in restricting the access of small and medium-sized enterprises (SMEs) to these services Qatar Investment Activities Sample Essay.

After collecting information on the perceptions of small and medium-sized enterprises (SMEs) regarding the investment banking functions and their costs, the next question collects information on the intentions of small and medium-sized enterprises (SMEs) in utilizing or demanding the investment bank functions or services if they are provided at more affordable and accessible ways. Specifically, the eighth question asks, “To what extent do you agree that small and medium-sized enterprises (SMEs) would be more active in terms of investment bank functions like underwriting services, initial public offerings (IPOs), going public, mergers & acquisitions (M&As) intentions, data closure requirements etc. if they were provided at more affordable ways?”. This question gets direct information on whether small and medium-sized enterprises (SMEs) would demand investment bank functions like underwriting services, initial public offerings (IPOs), going public, mergers & acquisition (M&A) intentions, data closure requirements her investment bank functions. This is another crucial question for the main research problem and the main research hypothesis Qatar Investment Activities Sample Essay.

After these detailed questions, the last two questions in the survey ask about incorporating these investment banking functions under development banks. Specifically, the ninth question asks “To what extent do you agree that investment banks functions (like underwriting services, initial public offerings (IPOs), going public, merger & acquisition (M&A) intentions, data closure requirements etc.) should be provided by the development banks at more affordable and subsidized rates?” and the tenth question asks “To what extent do you agree that small and medium-sized enterprises (SMEs) including your firm would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways?”. Overall, the questionnaire is designed in a detailed way to collect valuable information regarding the research topic.

Sample selection.

In terms of sample selection, obtaining a large and random sample of small and medium-sized enterprises (SMEs) would be very valuable for the robustness and generalizability of findings. However, obtaining a large random sample can be quite time consuming and require significant effort. In such cases, the researchers can prefer to follow other sampling techniques like convenience and snowballing methods. In the convenience method, the survey is distributed to a list of potential participants which can be reached easily and in a convenient way. Then, in the next step of sampling, the first round of participants would be asked to forward the survey to other possible participants that they know. So, through this snowballing technique, a larger sample can be obtained. Due to the existing feasibility issues and given the scope of the present study, the convenience sampling method is used in the current study Qatar Investment Activities Sample Essay.

Research Execution

Regarding the execution of the research process, the first step involved the design of the questionnaire. The details of the survey questions are discussed above. Thereafter, the survey is uploaded into the professional survey platform of Survey Monkey, and the relevant link is distributed to the potential participants from the small and medium-sized enterprises (SMEs). This approached followed due to the restriction of the COVID19. The participants are told that participation in the survey is voluntary, and no private information is collected regarding their firms. As explained in the previous sub-section, the survey does not collect any balance sheet or income statement data, as well as no information on certain firm characteristics. These points are explained to the customers in detail, and they are told that there is no data security or privacy issues for participating in the survey. In this way, 77 answers are collected. This number can be considered large enough to derive initial insights and information on the research question. The data is downloaded from Survey Monkey in graph and Microsoft Excel formats. Then, the collected data is examined using both descriptive methods (like graphical representations) and quantitative techniques (like regression estimations).

The graphical or descriptive analysis is useful to understand the responses of participants to individual survey questions. Some questions are factual (like whether the participating small and medium-sized enterprises (SMEs) have had any relations with development or investment banks), while some questions are about intentions (like whether small and medium-sized enterprises (SMEs) have intentions of going public) and other questions are about perceptions (like whether small and medium-sized enterprises (SMEs) think that investment banking functions should be incorporated into development banks). Then, the first step of the research analysis would be to understand how small and medium-sized enterprises (SMEs) responded to these research questions and how their answers are distributed within the questions. In this way, the details of answers to each question can be examined using both relevant numbers (like which per cent of participants choose specific answers like agreeing or disagreeing with a certain statement) and the graphical presentations. After these detailed analyses of the questions, the second step of the research execution is about the examination of relationships among the research questions. There are various questions that collect direct information on the research topic of the present study.

These are the last three questions in the survey. Namely, question 8 asks “To what extent do

you agree that small and medium-sized enterprises (SMEs) would be more actively utilizing Investment Banking Function if they were

provided at more affordable ways?”, question 9 asks “To what extent do you agree that

investment banks’ functions should be provided by the Development Banks at more affordable and subsidized rates?”, and question 10 asks “To what extent do you agree that small and medium-sized enterprises (SMEs) including your firm would utilize investment banking functions more actively if they are provided by

development banks in more accessible and affordable ways?”. While descriptive and graphical analyses are useful to understand the responses of small and medium-sized enterprises (SMEs) to these questions and the distribution of answers, it would be useful to investigate whether answers to these questions are related to any other factors Qatar Investment Activities Sample Essay. For example, the level of utilization by small and medium-sized enterprises (SMEs) of the development and investment bank services can be a factor that is positively associated with the perceptions on the benefits of investment bank functions’ therefore examining the relationships between different small and medium-sized enterprise (SME) behaviors, intentions, and perceptions. Towards this purpose, the regression equation estimations are useful as the tools of quantitative analysis. In this context, various OLS regression equations are estimated using the econometrics software of STATA.

Providing some details on the regression models and their execution would be valuable to understand the quantitative contribution of the present study. The regression models are more technical methods to check the relationship of a dependent variable and different variables. In the present context, the main variables of interest are the inclusion of investment bank functions under the development banks and the value-added of this strategy. There are some questions in the survey that can serve as the dependent variable. These can be listed as question 8 on the utilization of investment banking functions, question 9 on whether investment banking functions should be under development banks, and question 10 on whether small and medium-sized enterprises (SMEs) would utilize investment banking functions under development banks. Hence, these three questions can function as the dependent variables in the regression analysis. In terms of the independent variables, other questions can provide relevant information. One can categorize these independent variables under development bank relations (whether the participants have development bank relationships and whether they consider these relationships as valuable), investment strategies (whether going public or doing mergers & acquisitions (M&As) are valuable) and going public intention along with investment bank functions being valuable or expensive. So, the regression model considers three sets of independent variables. The technical regression models are presented as follows:

Utilize Investment Banksi

= β0 + β1Development Bank Relationsi+β2Development Bank Valıablei

+ β3Going Public Valuablei + β4MA Valuablei + β5Going Public Intentioni

+ β6Investment Bank Valuablei

+ β7Investment Bank Expensivei (1)

Investment Bank Functions should be under Development Banksi

= β0 + β1Development Bank Relationsi+β2Development Bank Valıablei

+ β3Going Public Valuablei + β4MA Valuablei + β5Going Public Intentioni

+ β6Investment Bank Valuablei

+ β7Investment Bank Expensivei (2)

Utilise Investment Bank Functions under Development Banksi

= β0 + β1Development Bank Relationsi+β2Development Bank Valıablei

+ β3Going Public Valuablei + β4MA Valuablei + β5Going Public Intentioni

+ β6Investment Bank Valuablei

+ β7Investment Bank Expensivei (3)

Overall, these three regression models provide very detailed information on the research question in terms of which factors matter more for different dependent variables. In addition, as another regression model, the following analysis uses the questions of whether investment banking functions are valuable for small and medium-sized enterprises (SMEs) as the dependent variable Qatar Investment Activities Sample Essay. These regression models are estimated using the standard ordinary least squares (OLS) method (Wooldridge, 2016). The professional econometrics software of STATA is used to estimate the

relevant regressions. Robust standard errors are utilised in the regressions to produce more robust findings. The screenshots of the estimations are presented in Appendix II.

Analysis of Data

This sub-section presents the analysis of data. Specifically, it focuses on the descriptive analysis of the collected survey data. In the next chapter, more technical analysis is conducted.

Profile of respondents.

The sample consists of SMEs selected using convenience and snowballing sampling techniques. Collecting primary data can face major data security and privacy issues when some information on the profiles of respondents is collected. In the current case, such sensitive information would be the age and size of the SMEs, along with some information on their balance sheets, income statements, and their relationships with development and investment banks. In the case of collecting such sensitive information, the participants might be reluctant to participate in the survey. To avoid low participation rates, as well as data security and privacy problems, the survey does not collect any information on respondent profiles, other than the information that they are all SMEs.

Analysis of responses.

This section presents the descriptive analysis of the survey answers. Figure 1 shows the responses to the first question which states that “Have you ever had relations (like getting finance or other services) with any development bank (i.e., domestic or international development banks like Qatar Development Bank)?”. It is seen that only 26% of the participants had some development bank relationship, while 74% did not have such a relationship. This is an interesting finding. There might be various reasons for this result. For example, it can be the case that these SMEs do not need the services and finance of the development banks or it is also likely that these SMEs do not qualify to access the development bank services. Irrespective of the reason, the low utilization levels of development banks by SMEs is an interesting result, and it might imply that development banks might also fail to reach a broad range of SMEs.

Based on these discussions, there can be an important policy area to address these low utilization levels Qatar Investment Activities Sample Essay. There can be some outreach programs aiming to include SMEs in the relevant development programs and finance. In additions, some research and primary data collection can be conducted on these SMEs that do not use the development bank facilities. The reasons and any impeding factors (like the lack of relevant human capital or the issues of informality) can be identified through these surveys and data collection efforts. Then, based on these findings, targeted policies can be devised to improve the interaction of SMEs with the development banks. The present study is not interested in the role of development banks for the economic development and progress of countries by increasing the potential and performance of SMEs. Instead, it is interested in the relevance of investment banking functions and whether their inclusion within the structure of development banks would be valuable.

However, the low utilisation level of development banks by SMEs is identified as an important policy area from the present study.

Figure 3: Question 1: Have you ever had relations with any development bank?

Figure 4: Questions 2: To what extent do you agree that the functions and finance provided by the Development Banks are valuable for SMEs?

80%

70%

60%

50%

40%

30%

20%

10%

0%

No Yes

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Strongly Disagree Neutral Agree Strongly Disagree Agree

Figure 4 shows the results of the second question, which asks “To what extent do you agree that the functions and finance provided by the Development Banks are valuable for SMEs?”. 45% of the respondents agree with this statement, while another 21% strongly agree Qatar Investment Activities Sample Essay.

As a result, the total agreement level is 66%. In contrast, 27% of the respondents are neutral regarding this statement, while the rest (i.e., 7%) disagree to some extent. Overall, the large majority of the SMEs in the survey consider the services and finance provided by development banks valuable for SMEs. This is an important finding in the sense that SMEs value development bank services; however, it is in some conflict with the first question showing low levels of development bank utilization by SMEs. This point can be examined in future research in more detail. As discussed above, the low utilization level of SMEs in Figure 3 does not seem to stem from the low perceptions of SMEs regarding the services of development banks. This is an important finding and can be examined by the policymakers to improve the effectiveness and inclusiveness of development banks.

Figure 5: Question 3: To what extent do you agree that it would be useful for SMEs go public and get listed in the stock markets as a way of increasing the scalability and attracting more capital?

Figure 6: Question 4: To what extent do you agree that Merger and Acquisitions increase the competitiveness of the SMEs in the ecosystem?

35%

30%

25%

20%

15%

10%

5%

0%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Figure 5 shows the answers to the third question, which asks that “To what extent do you agree that it would be useful for SMEs go public and get listed in the stock markets as a way of increasing the scalability and attracting more capital?”. This question tries to understand whether SMEs would look positively at going public and getting listed in stock markets. 27% of the respondents agree with this statement, while another 10% strongly agree. The total agreement level is 37%. In contrast, 30% of the respondents are neutral regarding this statement, while the rest (i.e., 33%) disagree to some extent. Overall, more than one-third of the SMEs in the survey think that going public would be a useful way of increasing scalability and attracting more capital. Close to two-thirds are either neutral or do not consider going public a useful way. This is an important finding for the research question in the sense that not all SMEs would need investment banking functions on going public as they do not consider getting listed as important or useful. Still, as one-third of the SMEs consider going public a useful strategy, it can be argued that investment banking functions can be valuable for some SMEs.

Figure 6 shows the answers to the fourth question, which asks that “To what extent do you agree that Merger and Acquisitions increase the competitiveness of the SMEs in the

ecosystem?”. This question tries to understand whether SMEs would look positively at M&A activities. 42% of the respondents agree with this statement, while another 14% strongly agree. The total agreement level is 56%. In contrast, 29% of the respondents are neutral regarding this statement, while the rest (i.e., 16%) disagree to some extent. Overall, more than half of the SMEs in the survey think that M&A activities would be helpful to increase the competitiveness of SMEs, while the rest of them are either neutral or disagree with this statement. This finding again implies that investment banking functions would be useful for some SMEs regarding M&A activities. Combined with the previous question, these two findings imply that investment banking functions can be quite useful for some SMEs (i.e., more than one-third in the case of going public and more than one-half in the case of M&As). It can be expected that the provision of the relevant investment banking functions to SMEs through development banks at more affordable and accessible ways would create additional value-added for these firms, as well as the overall economy Qatar Investment Activities Sample Essay.

fter these general questions, the fifth question directly asks whether the participant SME has any intention of going public. Figure 7 shows the relevant answers. It is seen that 79% of the respondents do not have any intention of going public, whereas 21% would consider this strategy as a future possibility. This rate is much lower than the agreement levels in the previous two questions. This discrepancy implies that while more than one-third of the participant SMEs consider going public and more than half consider M&A activities as useful strategies, they do not have solid plans on these dimensions. It is possible that the lack of access to the relevant services and the complexity of the relevant strategies become impeding factors for these SMEs to consider the strategy of going public and getting listed in stock markets. Therefore, understanding the perceptions of SMEs regarding the investment bank functions would be useful to understand such discrepancies in the survey answers and between the SME perceptions and investments.

Figure 7: Question 5: Does your firm have any intentions of going public?

Figure 8: Question 6: To what extent do you agree that the functions provided by the investment banks would be valuable for SMEs?

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

No Yes

60%

50%

40%

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0%

Figure 8 shows the answers to the sixth question, which asks that “To what extent do you agree that the functions provided by the investment banks would be valuable for SMEs?”. This question tries to understand whether SMEs would look positively at investment bank functions. 49% of the respondents agree with this statement, while another 16% strongly agree. The total agreement level is 65%. In contrast, 29% of the respondents are neutral regarding this statement, while the rest (i.e., 6%) disagree to some extent. Overall, a large majority of the SME participants agree that investment bank functions would be valuable to SMEs. This is an important finding and supportive evidence for the provision of investment banking functions to the SMEs. However, it is possible that, due to various factors like high fees and costs, SMEs might not be able to demand these services. The next question checks this possibility Qatar Investment Activities Sample Essay.

Figure 9: Question 7: To what extent do you agree that the functions provided by the traditional investment banks are too expensive, thereby restricting the access of SMEs to these banks and their services?

Figure 10: Question 8: To what extent do you agree that SMEs would be more actively utilizing Investment Banking Function if they were provided at more affordable ways?

45%

40%

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5%

0%

70%

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50%

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0%

Figure 9 shows the answers to the seventh question, which asks that “To what extent do

you agree that the functions provided by the traditional investment banks are too expensive,

thereby restricting the access of SMEs to these banks and their services?”. This question tries to understand whether SMEs would cost problems in accessing investment bank functions. 39% of the respondents agree with this statement, while another 25% strongly agree. The total agreement level is 64% Qatar Investment Activities Sample Essay. In contrast, 27% of the respondents are neutral regarding this statement, while the rest (i.e., 9%) disagree to some extent. Overall, close to two-thirds of the SME participants agree that investment bank services are too costly. This is another important finding in the sense that providing investment bank functions at more affordable and accessible ways would help the SME performance and overall development.

Figure 10 shows the answers to the eighth question, which asks that “To what extent do you agree that SMEs would be more actively utilizing Investment Banking Function if they were provided at more affordable ways?”. This question tries to understand whether SMEs would utilize investment banking functions would be utilized more actively if the relevant services and products are provided at more affordable and accessible ways. 62% of the respondents agree with this statement, while another 18% strongly agree. The total agreement level is quite high, with 80%. In contrast, 18% of the respondents are neutral regarding this statement, while only 1% of the participants disagree. Overall, very strong results are produced on this question.

SMEs are quite explicit that they would utilize the relevant investment banking functions if they are provided at more affordable and accessible ways. This question provides strong support for the main research hypothesis that investment banking functions would produce value-added for SMEs.

Figure 11 shows the answers to the ninth question, which asks that “To what extent do you agree that investment banks’ functions should be provided by the Development Banks at more affordable and subsidized rates?”. This question tries to understand whether SMEs would prefer the inclusion of investment bank functions under the portfolio of development banks Qatar Investment Activities Sample Essay.

40% of the respondents agree with this statement, while another 29% strongly agree. The total agreement level is 69%. In contrast, 22% of the respondents are neutral regarding this statement, while the rest (i.e., 9%) disagree to some extent. Overall, two-thirds of the SME participants agree that investment banking functions should be provided under the roof of development banks.

Figure 11: Question 9: To what extent do you agree that investment banks’ functions should be provided by the Development Banks at more affordable and subsidized rates?

Figure 12: Question 10: To what extent do you agree that SMEs, including your firm, would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways?

45%

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20%

15%

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0%

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0%

Finally, Figure 12 shows the answers to the tenth and the last question, which asks that “To what extent do you agree that SMEs, including your firm, would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways?”. This question tries to understand whether SMEs would utilize investment bank function if they are included under the portfolio of development banks. 51% of the respondents agree with this statement, while another 21% strongly agree. The total agreement level is 72%. In contrast, 25% of the respondents are neutral regarding this statement, while the rest (i.e., 4%) disagree to some extent Qatar Investment Activities Sample Essay. Overall, a large majority of the SME participants agree that they would utilize investment bank functions provided by development banks. Overall, these last two questions provide very strong support for the main research hypothesis.

Analysis and Conclusion

The previous chapter provided a descriptive analysis of the survey data and also gives the results of quantitative analysis, like summary statistics and regression findings. These findings can be used to test the research hypothesis and to reach some initial conclusions. In this context, Table 1 shows the summary statistics of the variables used in the analysis. There are 77 observations in the sample, while there is one missing answer for the development bank relationship and going public intention. It is seen from the table that 26% of the SMEs in the survey have some relationship with development banks, while the rest do not have any relationship with development banks Qatar Investment Activities Sample Essay.

Table 1: Summary Statistics of Variables

Descriptive Statistics

Variable

Obs

Mean

Std.Dev.

Min

Max

Development

Relationship

Bank

76

0.26

0.44

0

1

Development

Services Valuable

Bank

77

3.77

0.94

1

5

Going Public Valuable

77

3.08

1.12

1

5

M&A Valuable

77

3.52

0.98

1

5

Going Public Intention

76

0.21

0.41

0

1

Investment

Services Valuable

Bank

77

3.74

0.80

2

5

Investment Bank

Services Expensive

77

3.78

0.95

1

5

Utilize Investment Bank

Services

77

3.97

0.65

2

5

Investment Bank

Services Provided by Development Banks

77

3.86

1.00

1

5

Utilize Investment Bank Services under Development Banks

77

3.88

0.83

1

5

Table 1 shows that, regarding the Likert-scale answers, there are very high average scores. For example, in response to question 8, which asks “To what extent do you agree that SMEs would be more actively utilizing Investment Banking Function if they were provided at more affordable ways?”, the average agreement level is 3.97 out of 5: as a result, the SMEs in the survey have very strong positive opinions for this statement. Similarly, very high agreement levels (an average score of above 3.5 out of 5) are observed in other questions. The only question with an average score of less than 3.5 is for the usefulness of going public for SMEs Qatar Investment Activities Sample Essay.

5.1. Theoretical Testing of Major Hypothesis

Previously the major hypothesis of this thesis is formulated as the following:

Null Hypothesis: Ho: Implementation of investment banking services by development banks such as Mergers & Acquisitions, Investment Valuation, and Public and Private Placement will not create value for their SMEs customers Qatar Investment Activities Sample Essay.

Alternative Hypothesis: Ha: Implementation of investment banking services by development Banks such as Mergers & Acquisitions, Investment Valuation, and Public and Private Placement will create value for their SMEs customers.

In this section by relying solely on theoretical arguments and concepts we will attempt to reject the null hypothesis and accept the alternative hypothesis. At the heart of this hypothesis testing process is the arguments revolving around informational asymmetries.

Asymmetric information, i.e., information failure, happens when one side of the economic transaction possesses more material information than that of the counterparty. Under such conditions lemon problems coined by Nobel Prize winner George Akerlof arise. Markets in which borrowers search for direct finance options by issuing bonds and equities are prone to lemon problems, especially for SMEs, about which investors have very limited information. Investment banks whose primary functions include helping companies to bring their shares to markets and underwrite bond offerings are instrumental to alleviate asymmetric information related problems, which, if not handled properly, can cause companies to incur significant amount of costs in that many SMEs chose not to use such services offered by investment banks. In other words, SMEs that want to use capital markets, by themselves, cannot solve asymmetric information related problems and thus their cost of capital obtained through capital markets would be much higher than their marginal product of capital Qatar Investment Activities Sample Essay. As a result, SMEs would not be able to secure funds through capital markets to expand. Since funds secured through individual resources such as families, friends, or even commercial banks will be limited, SMEs would be bound to stay small. As a result, their potential of becoming big and more productive for the entire economy will not be realized.

The following example depicts how lemon problems arise in capital markets when SMEs seek direct funding such as funds through equity and/or bond issuances. Let’s assume that a typical Qatari investor cannot distinguish good SMEs with higher expected free cash flows and lower risk and bad SMEs with lower free cash flows and higher risk. This is a highly realistic assumption in that for individual investors to collect information to distinguish good SMEs from bad ones is very costly. Furthermore, let’s also assume that in the market 50% of SMEs are good ones whose stock can be valued at $50 per share and 50% of SMEs are bad ones whose stock can be valued at $10 per share: as a result, the maximum price that a typical Qatari investor will accept will be $30 per share, which is the expected value [50% x $50 + 50% x $10 =

$30]. Managers or owners of good SMEs, therefore, will know that their stock will be undervalued in the equity market in that $50 per share cannot be realized when the investors’ maximum valuation is $30. On the other hand, managers or owners of bad SMEs will know that in the equity market their stocks will be overvalued because they will receive $30, more than the fair value of their stock, which is $10 per share Qatar Investment Activities Sample Essay.

In other words, the only SMEs that are willing to sell their stocks in the equity market will be bad, i.e., in the parlance of Akerlof’s framework, lemon SMEs. Since a typical Qatari investor is a rational one, he or she will not engage in this equity market of SMEs because he or she will know that in such market only bad SMEs stocks (or bonds) will be traded. As a result,

there will not be an equity market for SMEs. The same logic can be applied to bond issuances to conclude that there will not be a bond market for SMEs. In other words, because of the lemon problems, SMEs are restricted to find funding through individuals (mostly through their own savings, parents and friends of their owners) or highly specialized financial intermediaries that can solve this asymmetric information problem in a cost-effective way. In fact, from a survey entitled The State of SMEs in Qatar – 2016, the following information is obtained.

Figure 13: Top 5 Sources of Finance for Business Start-ups in Qatar

Chart, bar chart  Description automatically generated

Source: https://www.qdb.qa/en/Documents/The%20Satate%20of%20SMEs%20in%20Qatar- 2016_EN-Web%20-%20P.pdf

As seen from Figure 13, the overwhelming majority of funding of SMEs comes from personal savings, loan from a friend/relative and loan from commercial banks because of asymmetric information related problems can be solved by this group easily without incurring substantial costs.

Investment banks can also solve this asymmetric information problem but that would be highly costly for SMEs. However, investment bank activities that help corporations to find external funding in the forms of equity or bond are fixed cost undertakings in that there are substantial scale economies to be achieved. In fact, from the sample data available in figure below (Figure 13) it can be inferred that average funding size of median deal size of IPO in the United States from 2005 to 2019 is US$120 million with a standard deviation of US$ 22 million. In other words, from the data it can be 95% confident that the average median IPO size is between US$108 million and US$132 million Qatar Investment Activities Sample Essay.

When we look at the latest IPO realized in Qatar, the following is observed: “Baladna Food Industries (BFI), the locally owned dairy and beverage company which has become the beacon of self-sufficiency drive in Qatar, announced yesterday to raise about QR1.42bn ($382m) in an initial public offering (IPO) of 1,425,750,000 new shares (the Offer Shares) on the Qatar Stock Exchange, representing 75 percent of the share capital of the Company (Shoeb, 2019). “

The size of Baladna Food Industries (BFI) IPO is $382 million, even larger than the median of US IPOs. This IPO process was undertaken by one of the global investment banking institutions indicating that (1) IPOs are rare in Qatar, and (2) IPO sizes are significantly higher.

The larger the firm (i.e., the larger the IPO) the lower the average cost that will be incurred per security issued is by an investment bank. Since investment banks are profit maximizers, they will only consider private marginal benefit. Serving SMEs for their funding needs has social marginal benefit in that SMEs help the society in terms of unemployment reduction, potential productivity improvements, developing entrepreneurs and so on. In other words, SMEs generate positive externalities. However, investment banks by focusing on only private benefits cannot internalize these positive externalities. In Figure 14, graphic representation of undersupplying in the SMEs by investment banks is depicted Qatar Investment Activities Sample Essay.

Figure 14: Underserving of SMEs Finance by Investment Banks

Chart, line chart  Description automatically generated

Investment banks will be serving Q1 units of SMEs because at Q1 marginal private benefit is equal to the marginal cost. As it can be seen from the graph socially optimal number of SMEs served is Q2. Development banks that include investment bank services that are designed to maximize social benefit on the other hand will achieve socially optimal level.

From this analysis it becomes obvious that funding issues for SMEs cannot be resolved through capital markets with the help of investment banks because of asymmetric information related issues that increase the cost of capital for SMEs. In a capital market, a typical investor will demand higher returns from SMEs securities. Investment banks would demand higher fees from SMEs to undertake their security issuance processes. When the cost of capital is higher than that of the marginal productivity of the capital invested in SMEs, there will not be growth opportunities for SMEs through funds secured in capital markets with the help of investment banks Qatar Investment Activities Sample Essay.

Being able to raise large funding resources through capital markets, development banks with investment bank functions have a very high probability of creating value for their SMEs clients. These funds will enable SMEs to benefit from growth opportunities by undertaking large investments that cannot be funded through personal resources. Thus, we reject the null hypothesis to conclude that implementation of investment banking services by development banks such as Mergers & Acquisitions, Investment Valuation, and Public and Private Placement will no create value for their SMEs customers. In other words, we accept the alternative hypothesis that Implementation of investment banking services by development Banks such as Mergers & Acquisitions, Investment Valuation, and Public and Private Placement will create value for their SMEs customers Qatar Investment Activities Sample Essay.

Hypothesis Testing – Survey Questions

The first survey question asking whether the respondent has ever had relations with any development bank obtained results whereby we can be 95 % confident that the population proportion of the SMEs that have ever had relations with any development bank is (0.1642, 0.3622). If this information is presented in the form of hypothesis testing to test if at least 50% of the Qatari SMEs have ever had relations with any development bank, the following null and the alternative hypotheses are formulated:

H0: Population proportion of the SMEs that have ever had relations with any development bank ≥ 0.50.

Ha: Population proportion of the SMEs that have ever had relations with any development bank <0.50.

At 5% significance level we reject the null hypothesis (p-value of 0.000018, z=-4.22)) to conclude that less than 50% Qatari SMEs that have ever had relations with any development bank. In other words, the true population proportion of the Qatari SMEs that that have ever had relations with any development bank is between 16.42% and 36.22% at 95% confidence level.

With respect to the second survey question, “To what extent do you agree that the functions and finance provided by the Development Banks are valuable for SMEs?” [1-Strongly disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.56, 3.98) Qatar Investment Activities Sample Essay. If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that the functions and finance provided by the Development Banks are valuable are formulated as the following:

H0: The mean score is at most 3 (μ ≤ 3).

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we reject the null hypothesis (p-value of 0.000000, t=7.188) to conclude that the Qatari SMEs agree that the functions and finance provided by the Development Banks are valuable.

With respect to the third survey question, “To what extent do you agree that it would be useful for SMEs go public and get listed in the stock markets as way of increasing the scalability and attracting more capital?” [1-Strongly disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (2.826, 3.334). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that it would be useful for SMEs to go public and get listed in the stock markets as a way of increasing the scalability and attracting more capital are formulated as the following:

H0: The mean score is at most 3 (μ ≤ 3).

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we fail to reject the null hypothesis (p-value of 0.26634, t=0.626783) to conclude that the Qatari SMEs do not agree that it would be useful for SMEs to go public and get listed in the stock markets as way of increasing the scalability and attracting more capital.

With respect to the fourth survey question, “To what extent do you agree that Merger and Acquisitions increases the competitiveness of the SMEs in the ecosystem?” [1-Strongly disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.298, 3.742). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that Mergers and Acquisitions increase the competitiveness of the SMEs in the ecosystem are formulated as follows:

H0: The mean score is at most 3 (μ ≤ 3) Qatar Investment Activities Sample Essay.

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we reject the null hypothesis (p-value of 0.000007, t=4.6561) to conclude that the Qatari SMEs agree that Mergers and Acquisitions increase the competitiveness of the SMEs in the ecosystem.

With respect to the fifth survey question based on our survey results we can be 95 % confident that the population proportion of the SMEs that have any intentions of going public is (0.1189, 0.3022). If this information is presented in the form of hypothesis testing to test if at least 50% of the Qatari SMEs that have any intentions of going public, the following null and the alternative hypotheses are formulated as follows:

H0: Population proportion of the SMEs that have any intentions of going public ≥ 0.50. Ha: Population proportion of the SMEs that have any intentions of going public < 0.50.

At 5% significance level we reject the null hypothesis (p-value of 1, z=-5.04715) to conclude that less than 50% Qatari SMEs have any intention of going public. In other words, the true population proportion of the Qatari SMEs that have any intention of going public is between 11.89% and 30.22% at 95% confidence level.

With respect to the sixth survey question, “To what extent do you agree that the functions provided by the investment banks would be valuable for SMEs?” [1-Strongly disagree, 2- Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.558, 3.922). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that the investment banks would be valuable for them are formulated as follows:

H0: The mean score is at most 3 (μ ≤ 3).

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we reject the null hypothesis (p-value of 0.000000, t=8.11684) to conclude that the Qatari SMEs agree that the investment banks would be valuable for them.

With respect to the seventh survey question, “To what extent do you agree that the functions provided by the traditional investment banks are too expensive, thereby restricting the access of SMEs to these banks and their services?” [1-Strongly disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.564, 3.996). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that the functions provided by the traditional investment banks are too expensive, thereby restricting the access of SMEs to these banks and their services are formulated as follows:

H0: The mean score is at most 3 (μ ≤ 3).

Ha: The mean score is greater than 3 (μ > 3) Qatar Investment Activities Sample Essay.

At 5% significance level we reject the null hypothesis (p-value of 0.000000, t=7.20471) to conclude that the Qatari SMEs agree that the functions provided by the traditional investment banks are too expensive, thereby restricting the access of SMEs to these banks and their services.

With respect to the eighth survey question, “To what extent do you agree that SMEs would be more actively utilizing investment banking functions if they were provided at more affordable ways?” [1-Strongly disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.822, 4.118). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that SMEs would be more actively utilizing investment banking functions if they were provided at more affordable ways are formulated as follows:

H0: The mean score is at most 3 (μ ≤ 3).

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we reject the null hypothesis (p-value of 0.000000, t=13.0949) to conclude that the Qatari SMEs agree that SMEs would be more actively utilizing investment banking functions if they were provided at more affordable ways.

With respect to the ninth survey question, “To what extent do you agree that investment banks’ functions should be provided by the development banks at more affordable and subsidized rates?” [1-Strongly disagree, 2-Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.633, 4.087). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that investment banks’ functions should be provided by the development banks at more affordable and subsidized rates are formulated as follows:

H0: The mean score is at most 3 (μ ≤ 3) Qatar Investment Activities Sample Essay.

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we reject the null hypothesis (p-value of 0.000000, t=7.54647) to conclude that the Qatari SMEs agree that investment banks’ functions should be provided by the development banks at more affordable and subsidized rates.

With respect to the tenth survey question, “To what extent do you agree that SMEs including your firm would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways?” [1-Strongly disagree, 2- Disagree, 3-Neutral, 4-Agree, 5-Strongly agree], a 95% confidence interval for the mean score is (3.692, 4.0068). If this information is presented in the form of hypothesis testing, the following null and the alternative hypotheses to test if the Qatari SMEs agree that SMEs would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways are formulated as follows:

H0: The mean score is at most 3 (μ ≤ 3).

Ha: The mean score is greater than 3 (μ > 3).

At 5% significance level we reject the null hypothesis (p-value of 0.000000, t=9.30358) to conclude that the Qatari SMEs agree that SMEs firm would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways Qatar Investment Activities Sample Essay

Hypothesis Testing – Regression Analysis

This section conducts the regression analysis using the survey data. The three important variables that matter for the main research problem and the main research hypothesis are whether SMEs would utilise the investment banking functions if these services and products were more affordable and accessible, whether the investment banking functions should be included under development banks, and whether they would utilise investment banking functions when provided under development banks. Therefore, some regression models are estimated in STATA to understand the relationship of these three variables with the remaining questions in the survey.

Table 2 presents the regression results for question 8, which asks whether SMEs would utilize the investment banking functions if they are provided at more affordable and accessible ways. The results in the upper panel show that this variable is not associated with the status of development bank relationship or the perceptions of SMEs regarding the value of development bank services. Similarly, the middle panel in Table 2 shows that perceptions of SMEs regarding the value-added of going public or doing M&As are not also statistically associated with the utilization levels of the investment banking functions. Finally, the lower panel of results in Table 2 shows that the three variables of the intentions of going public, whether investment banking functions are valuable, and whether investment banking functions are expensive, are not also associated with the intention to utilize investment banking functions. In order to check the joint significance of the independent variables in these OLS regressions, one can examine the F-stats and the corresponding p-values. It is seen from Table 2 that the relevant F-stats are relatively low, and the corresponding p-values are larger than 0.10. So, in addition to the individual regression coefficients being statistically insignificant, the relevant independent variables are not statistically significant in a joint way as well. These results are interesting, to some extent, in the sense that the intentions of using investment banking functions seem to be unrelated to many other behavioral, intentional, and perceptional factors in the current sample.

Table 2: Regression Results for Question 8 (Utilize investment banking functions)

Linear regression

utilise_inv_bank

Coef.

Robust

St.Err.

t-

value

p-

value

[95%

Conf

Interval]

Sig

dev_bank_relation

0.179

0.182

0.98

0.328

-0.183

0.540

dev_bank_valuable

0.085

0.079

1.07

0.286

-0.073

0.242

Constant

3.607

0.306

11.80

0.000

2.998

4.217

***

Mean dependent var

3.974

SD dependent var

0.653

R-squared

0.029

Number of obs

76

F-test

0.980

Prob > F

0.380

Akaike crit. (AIC)

153.591

Bayesian crit. (BIC)

160.583

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

utilise_inv_bank

Coef.

Robust

t-

p-

[95%

Interval]

Sig

St.Err.

value

value

Conf

go_public_valuable

0.109

0.078

1.39

0.168

-0.047

0.264

ma_valuable

0.041

0.080

0.51

0.612

-0.119

0.200

Constant

3.496

0.351

9.95

0.000

2.796

4.196

***

Mean dependent var

3.974

SD dependent var

0.648

R-squared

0.044

Number of obs

77

F-test

1.295

Prob > F

0.280

Akaike crit. (AIC)

153.284

Bayesian crit. (BIC)

160.315

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

utilise_inv_bank

Coef.

Robust

t-

p-

[95%

Interval]

Sig

St.Err.

value

value

Conf

go_public_intention

-0.039

0.213

-0.18

0.854

-0.464

0.385

inv_bank_valuable

0.137

0.116

1.19

0.240

-0.094

0.368

inv_bank_expensive

0.109

0.109

1.00

0.320

-0.108

0.326

Constant

3.054

0.544

5.61

0.000

1.969

4.140

***

Mean dependent var

3.974

SD dependent var

0.653

R-squared

0.050

Number of obs

76

F-test

0.966

Prob > F

0.413

Akaike crit. (AIC)

153.929

Bayesian crit. (BIC)

163.252

A similar regression model is estimated for the case of question 9, which asks whether the investment banking functions should be incorporated within the toolbox of the development banks. Table 3 presents the results of the relevant OLS regression estimations. In the upper panel of the table, the two independent variables are found to be statistically insignificant at both individual and joint levels. It follows that the experience of development bank relationship and perceiving development bank services as valuable are not statistically associated with the opinions on whether investment banking functions should be incorporated into the portfolio of development banks Qatar Investment Activities Sample Essay. In contrast to these statistically insignificant results in the upper panel of Table 3, the regressions result in the middle panel show that the coefficient for the perception of going public being valuable is positive and statistically significant at the 1% level. This result implies that SMEs which see going public as a valuable business strategy also have higher levels of agreement with the statement that investment banking functions should be incorporated under development banks. Based on this finding, it can be argued that the relevance of investment banking functions (in terms of seeing them as valuable) can be an important predictor of the positive attitudes of SMEs towards these functions and their provision by the development banks. Lastly, in the lower panel of Table 3, the relevance of three other independent variables (i.e., the intention of going public, considering investment banking functions as valuable, and agreeing that accessing these functions through investment banks is too expensive) for the question on whether investment banking functions should be included under development banks. Among these three independent variables, the regression coefficient for the opinion that investment banking functions are valuable is positive and statistically significant at the 1% level. This finding implies that SMEs which consider investment banking functions as valuable have significantly higher agreement levels with the view on the inclusion of these functions under the development banks. Based on this finding, it can be argued that SMEs which see investment banking functions would be willing to utilise these functions at a higher rate than other SMEs, and they would also support the inclusion of these functions under development banks Qatar Investment Activities Sample Essay.

*** p<0.01, ** p<0.05, * p<0.1

Table 3: Regression Results for Question 9 (whether investment banking functions should be under development banks)

Linear regression

inv_bank_dev_bank Coef. Robust

t- p- [95% Interval] Sig

St.Err.

value value Conf

dev_bank_relation 0.333 0.204

1.63 0.107 -0.074 0.740

dev_bank_valuable 0.012 0.136

0.09 0.930 -0.259 0.283

Constant 3.722 0.492

7.57 0.000 2.742 4.702 ***

Mean dependent var 3.855

SD dependent var 1.003

R-squared 0.022

Number of obs 76

F-test 1.344

Prob > F 0.267

Akaike crit. (AIC) 219.418

Bayesian crit. (BIC) 226.410

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

inv_bank_dev_bank

Coef.

Robust

St.Err.

t-

value

p-

value

[95%

Conf

Interval]

Sig

go_public_valuable

0.266

0.095

2.80

0.007

0.077

0.456

***

ma_valuable

0.023

0.102

0.23

0.822

-0.181

0.227

Constant

2.957

0.474

6.24

0.000

2.012

3.902

***

Mean dependent var

3.857

SD dependent var

0.996

R-squared

0.093

Number of obs

77

F-test

4.087

Prob > F

0.021

Akaike crit. (AIC)

215.389

Bayesian crit. (BIC)

222.421

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

inv_bank_dev_bank

Coef.

Robust

St.Err.

t-

value

p-

value

[95%

Conf

Interval]

Sig

go_public_intention

-0.318

0.271

-1.17

0.244

-0.858

0.222

inv_bank_valuable

0.379

0.154

2.46

0.016

0.073

0.686

**

inv_bank_expensive

0.154

0.134

1.15

0.254

-0.113

0.421

Constant

1.921

0.815

2.36

0.021

0.295

3.546

**

Mean dependent var

3.855

SD dependent var

1.003

R-squared

0.116

Number of obs

76

F-test

2.304

Prob > F

0.084

Akaike crit. (AIC)

213.691

Bayesian crit. (BIC)

223.014

*** p<0.01, ** p<0.05, * p<0.1

Finally, Table 4 presents the OLS regression results for the last question, which asks “To what extent do you agree that SMEs including your firm would utilize investment banking functions more actively if they are provided by development banks in more accessible and affordable ways?”.

utilise_inv_dev_bank

Coef.

Robust

St.Err.

t-

value

p-

value

[95%

Conf

Interval]

Sig

go_public_valuable

-0.174

0.089

-1.96

0.054

-0.350

0.003

*

ma_valuable

0.068

0.088

0.77

0.447

-0.109

0.244

Constant

4.179

0.351

11.90

0.000

3.479

4.879

***

Table 4: Regression Results for Question 10 (whether SMEs would utilize investment banking functions under development banks)

Linear regression

utilise_inv_dev_bank Coef. Robust

t- p- [95% Interval] Sig

St.Err.

value value Conf

dev_bank_relation 0.085 0.220

0.39 0.698 -0.352 0.523

dev_bank_valuable 0.121 0.129

0.94 0.352 -0.137 0.379

Constant 3.416 0.514

6.65 0.000 2.392 4.440 ***

Mean dependent var 3.895

SD dependent var 0.826

R-squared 0.021

Number of obs 76

F-test 0.568

Prob > F 0.569

Akaike crit. (AIC) 189.979

Bayesian crit. (BIC) 196.972

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

Mean dependent var

3.883

SD dependent var

0.827

R-squared

0.053

Number of obs

77

F-test

1.928

Prob > F

0.153

Akaike crit. (AIC)

189.996

Bayesian crit. (BIC)

197.028

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

utilise_inv_dev_bank Coef. Robust

t- p- [95

% Interval] Sig

St.Err.

value value Conf

go_public_intention -0.006 0.252

-0.03 0.980 -0.5

08 0.495

inv_bank_valuable -0.080 0.133

-0.60 0.549 -0.3

46 0.186

inv_bank_expensive 0.096 0.130

0.74 0.463 -0.1

63 0.354

Constant 3.833 0.609

6.30 0.000 2.61

9 5.046 ***

Mean dependent var 3.895

SD dependent var

0.826

R-squared 0.018

Number of obs

76

F-test 0.255

Prob > F

0.858

Akaike crit. (AIC) 192.187

Bayesian crit. (BIC)

201.510

*** p<0.01, ** p<0.05, * p<0.1

The results of Table 4 show that for the intentions of using the investment banking functions under development banks, none of the independent variables have positive and statistically significant results. The coefficient for the opinion that going public is valuable is statistically significant at the 10% level, but its sign is negative. So, it becomes difficult to interpret this finding Qatar Investment Activities Sample Essay. Overall, it can be argued that the evidence presented in these descriptive and quantitative analyses is mostly supportive of the research hypothesis that putting investment banking functions under development banks would create additional value-added for SMEs and the general economy. However, the empirical evidence is not very informative on the determinants of these positive attitudes of SMEs towards investment banking functions.

As a robustness analysis, Table 5 presents the results of OLS regressions were the

dependent variable is the answer to the question “To what extent do you agree that the

functions provided by the investment banks would be valuable for SMEs?”. The table presents four sets of regressions. The results indicate that the variable of the utilization of investment banking functions under the development bank portfolio has a statistically significant and positive regression coefficient. In the first panel, the two independent variables are the status of the relationship of SMEs with the development banks and the views that development bank functions are valuable. It is seen that none of these variables are statistically significant at the 10% level. In the second panel, the two independent variables are the opinions of SMEs on whether going public and M&As activities are valuable strategies. It is seen that the regression coefficient for the variable of going public being valuable is positive and statistically significant at the 5% level. This variable was found to be statistically significant in the case of question 10 as well. Based on this finding, it can be argued that SMEs which consider going public as a valuable business strategy also consider investment banking functions as valuable to SMEs. In the third panel of Table 5, the regression coefficients for the intentions of going public and views that investment banking functions being expensive have no statistical significance Qatar Investment Activities Sample Essay.

Finally, in the fourth and last panel of Table 5, it is seen that there is a positive and statistically significant association between considering investment banking functions as valuable and the view that investment banking functions should be placed under development banks.

Table 5: Regression Results for whether investment banking functions are valuable for SMEs

Linear regression

inv_bank_valuable

Coef.

Robust

St.Err.

t-value

p-

value

[95%

Conf

Sig

Interval]

dev_bank_relation

0.171

0.214

0.80

0.428

-0.256

0.597

dev_bank_valuable 0.199 0.124 1.61 0.112 -0.047 0.445

Constant 2.943 0.474 6.21 0.000 1.999 3.887 ***

Mean dependent var

3.737

SD dependent var

0.806

R-squared

0.062

Number of obs

76

F-test

2.032

Prob > F

0.138

Akaike crit. (AIC)

183.042

Bayesian crit. (BIC)

190.034

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

inv_bank_valuable

Coef.

Robust

St.Err.

t-value

p-

value

[95%

Conf

Interval]

Sig

go_public_valuable

0.147

0.086

1.72

0.090

-0.024

0.318

*

ma_valuable

0.131

0.092

1.42

0.159

-0.052

0.315

Constant

2.825

0.448

6.30

0.000

1.931

3.718

***

Mean dependent var

3.740

SD dependent var

0.801

R-squared

0.083

Number of obs

77

F-test

2.379

Prob > F

0.100

Akaike crit. (AIC)

182.709

Bayesian crit. (BIC)

189.740

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

inv_bank_valuable

Coef.

Robust

St.Err.

t-

value

p-

value

[95%

Conf

Sig

Interval]

go_public_intention

0.039

0.257

0.15

0.881

-0.474

0.552

inv_bank_expensive

-0.034

0.117

-0.29

0.770

-0.267

0.199

Constant

3.859

0.450

8.57

0.000

2.962

4.756

***

Mean dependent var

3.737

SD dependent var

0.806

R-squared

0.002

Number of obs

76

F-test

0.046

Prob > F

0.955

Akaike crit. (AIC)

187.795

Bayesian crit. (BIC)

194.787

*** p<0.01, ** p<0.05, * p<0.1

Linear regression

inv_bank_valuable Coef. Robust

t- p- [95%

Sig

St.Err.

value value Conf

Interval]

utilise_inv_bank 0.056 0.179

0.32 0.753 -0.300

0.413

inv_bank_dev_bank 0.248 0.109

2.28 0.026 0.031

0.465

**

utilise_inv_dev_bank – 0.109

-1.28 0.204 -0.356

0.077

0.139

Constant 3.099 0.861

3.60 0.001 1.384

4.815

***

Mean dependent var 3.740

SD dependent var

0.801

R-squared 0.112

Number of obs

77

F-test 2.897

Prob > F

0.041

Akaike crit. (AIC) 182.251

Bayesian crit. (BIC)

191.626

*** p<0.01, ** p<0.05, * p<0.1

Intermediate Conclusions

The above empirical analysis indicates that while the SMEs in the survey have low levels of utilizing development banks or investment banks, they usually have positive perceptions regarding the services provided by both the development and investment banks. In addition, they have high intentions of utilising these services if they are provided at more affordable and accessible ways under the portfolio of development banks. Based on these conclusions, it can be recommended that investment banking functions can be incorporated into the toolset of development banks Qatar Investment Activities Sample Essay.Conclusions and Recommendations

Summary of Findings

The present study examines the topic of whether including investment banking functions under the portfolio of development banks would be valuable for SMEs and whether the SMEs would utilize such services and products. The literature review shows that SMEs are the engines of economic growth for both advanced and developing countries. In addition, they are responsible for an important segment of business investments and exports, as well as the large majority of employment growth. Therefore, the health and growth of SMEs matter greatly for the overall economic performance and development of countries. However, the literature also shows that SMEs face significant challenges, especially on the finance dimensions. Therefore, devising relevant policies and programs to support SMEs on different dimensions, including finance side and investment banking functions, stand out as effective ways to improve the performance of SMEs.

In order to see whether extending the operational scope of development banks to include investment bank functions would create value-added for SMEs and the overall economy, the present study devises a research design involving an online questionnaire and primary data collection. For that purpose, a sample of 77 SMEs is used to understand the behaviors, intentions, and perceptions of SMEs towards the development and investment banks, as well as the inclusion of investment functions under development banks. The survey

The results indicate that SMEs have low utilization levels regarding the development and investment bank services. However, they state high levels of positive perceptions and usage intentions regarding investment banking functions if these services and products are provided under development banks Qatar Investment Activities Sample Essay. The results indicate that only around 26% of the participants have had any relationship with development banks in terms of using relevant services and funding. In contrast, around three quarters did not have such an experience. The low utilization level of development banks by SMEs stands out as an important research and policy question. In contrast to these low utilization levels, around two-thirds of the SMEs consider that the services and funding of development banks are valuable to SMEs. Regarding some investment banking strategies and functions, more than one-third of SMEs consider going public as valuable and more than half of the SMEs consider M&A strategies as valuable. Based on these views, when SMEs are asked whether they consider investment banking functions as valuable for SMEs, around two-thirds of the participants agree with this statement. However, more than half of the SMEs also think that accessing these functions through investment banks is too expensive. Then, they agree at very high levels that they would utilize investment bank functions if these services and products are provided at more affordable and accessible ways through development banks. As a result, close to 70% of the survey participants agree that SMEs investment banking functions should be included under development banks and more than 70% of the SMEs state that they would utilize such function when they are provided by development banks Qatar Investment Activities Sample Essay.

Overall Conclusion

The overall conclusion of the present study is that some SMEs would benefit greatly from the provision of investment banking functions like underwriting services, IPOs, going public, M&As intentions, data closure requirements etc. if these services and products were provided at more affordable and accessible ways by development banks.

Recommendations

The results of the study produced some strong conclusions. They imply that extending the capacity of development banks to incorporate investment banking functions would be very valuable for some SMEs. The results indicate that some SMEs do not have intentions of going public or utilizing investment banking functions. However, around half of the participants SMEs in the survey display strong preferences for such strategies and services. Therefore, the provision of investment banking functions under development banks stands out as the most important recommendation. These functions can be instrumental for some SMEs to have broader strategies to grow and to increase their performances. In this way, the productivity and growth of SMEs would increase, thereby supporting the economic development of the country.

While the inclusion of investment banking functions into the portfolio of development banks emerges as the most important recommendation of the current study, there is one structural obstacle that this recommendation faces Qatar Investment Activities Sample Essay. The results indicate that SMEs have low utilization of development bank services. Namely, only around one-quarter of SMEs have had no relationships with the development banks in terms of using their services and funding. It follows that the inclusion of investment banking functions specifically and the provision of development banking functions in general seem to face accessibility issues for SMEs. If the low utilization levels of development bank functions by SMEs continue at the given poor levels, then the benefits of including investment banking functions would face some constraints in terms of reaching a broad range of SMEs. Therefore, a crucial policy recommendation is to improve the utilization of development bank functions by SMEs.

At this juncture, development banks offering investment bank functions such as undertaking equity and/or debt finance for SMEs might be instrumental, as mentioned above, to help socially optimal number of SMEs to find funding in capital markets. However, it should be mentioned that investment bank functions offered by a development bank to a single SME will not be cheaper than that of the pure play investment banks for the reasons mentioned above. However, this problem can be resolved through two channels (1) Subsidy and (2) Pooling.

First, governments can provide subsidies for development banks to increase the

marginal private benefit (MB’) of serving SMEs for their funding needs through investment bank functions such as undertaking security issuance activities of SMEs to the level of the marginal social benefit. With the subsidy therefore a development bank with the investment bank functions will be serving optimal amount of SMEs, i.e., Q2 numbers of SMEs. This is no different than a positive externality problem in which with the subsidy the externality can be internalized Qatar Investment Activities Sample Essay.

Figure 15: Subsidy

Chart, line chart  Description automatically generated

Furthermore, within the context of the development bank providing investment bank functions, there might be some scope economies that could be realized, which might reduce the marginal cost. “Economies of scope” refers to the possibility that the cost to produce a product (in our case a financial product) will decline as the variety of products increases. That is to say, the more different-but-similar goods a financial institution produces, the lower the total cost to produce each one due to the overheads. Since development banks with investment banking functions offer more financial products than pure play investment banks, there might be scope economies to be realized by development banks with investment banking functions. In the case of the existence of scope economies, the socially beneficial level of Q2 numbers of SMEs served could be achieved with a lesser amount of subsidy (Figure 5) Qatar Investment Activities Sample Essay.

Figure 16: Subsidy with Scope Economies