7FNCE045W: Capital Structure & Financial Performance of UK SMEs

This research proposal explores the impact of capital structure and its determinants on the financial performance of UK Small and Medium Enterprises (SMEs). The study aims to address the conceptual framework of capital structure, identify key determinants influencing financial performance, and analyze their overall impact. The literature review highlights the importance of capital structure in financing business operations and achieving business goals, referencing studies on determinants like trading on equity, cost of capital, and risk. The proposed methodology involves a quantitative approach using positivism philosophy and a deductive approach, with data collected through questionnaires from 20 managers of UK SMEs and analyzed using frequency distribution. The potential conclusions suggest that capital structure significantly impacts financial performance and that selecting the right capital-raising sources is crucial for SMEs to achieve their objectives.

Research Proposal Form
(MSc FinTech with Business Analytics)
Module Code: 7FNCE045W
Student Details:
Full Name: _____________________________________________________
University ID:___________________________________________________

Provisional Title of Project:
To analysis the impact of Capital structure and its determinants on the financial performance
of the UK Small and medium enterprise
Provisional Research Question(s):
1. What is the conceptual framework of capital structure in the context of organisational
performance?
2. What are the various determinants of capital structure in improving financial performance
of small and medium enterprise?
3. What is the impact of Capital structure and its determinants on the financial performance
of the UK Small and medium enterprise?
Brief Literature Review (approximately 150 words):
According to Dakua (2019), Capital structure refers to the sum of all the debts and
equity that is used by the company to finance them. This is used by the company to raise fund
in order to perform their business operation. Capital structure supports the business by
financing the assets and providing funding to the business operation. It is important for the
companies in order to expand their business or diversify their operation. Right Capital
structure of the business help the companies to attain their business goals in effective and
efficient manner.
As per the view of Khémiri and Noubbigh (2018), there are various determinates of
capital structure which helps in improving the financial performance of the UK SMEs. Some
of them are Trading on equity, cost of capital, risk, cash flow, nature and size of the firm and
many more. These al affect the financial performance of the company and also helps in
identify the right source of capital structure.
As per the view of Chakrabarti and Chakrabarti (2019), if capital structure of the
company is developed as per the need of the organisation that it will impact the financial
performance of the company is positive manner. It helps the company to raise this capital and
do their business operation in smooth and flexible manner. Another impact is increasing and
diversifying the business operation in accurate way without creating much burden.

Research Method(1 paragraph description eg. regression method, build model etc.)
In this research quantitative research choice will be chosen by the researcher in order to
obtain numerical information. To analyse and gathered data positivism philosophy will be
used and to test the hypothesis deductive approach will be selected.
Data will be analysed using frequency distribution method in order to know the importance of
capital structure on financial performance.
Data (proposed data source (egbloomberg), data details (eg time period, frequency)
etc.):
Data collection is the method of gathering data. As per the current research primary data will
be collected using questionnaire. The time horizon will be cross sectional so that research can
be completed on time.
The sample size will be 20 mangers of UK small and medium enterprises.

Potential Conclusions: what conclusions/contributions do you think you may find out?
1. From the above data it is being concluded that capital structure is very important for the
company because it helps in improving the financial performance of the company in greater
sense/
2. There are various determinants of capital structure which affect the performance of the
company. The manger needs to adopt right capital raising source in order to attain objective
Key ReferencesUsed In Creating Your Proposal (should be from quality journals)
Dakua, S., 2019. Effect of determinants on financial leverage in I ndian steel industry: A
study on capital structure. International Journal of Finance & Economics. 24(1).
pp.427-436.
Khémiri, W. and Noubbigh, H., 2018. Determinants of capital structure: Evidence from sub-
Saharan African firms. The Quarterly Review of Economics and Finance. 70.
pp.150-159.
Chakrabarti, A. and Chakrabarti, A., 2019. The capital structure puzzle–evidence from Indian
energy sector. International Journal of Energy Sector Management.
Li, K., Niskanen, J. and Niskanen, M., 2018. Capital structure and firm performance in
European SMEs: Does credit risk make a difference?. Managerial Finance.