Unlocking small and medium enterprises growth: The assessment of the role of capital market requirements in SMEs listing

Siegfried Maurice Kuwite; Neema Mori; Siasa Issa Mzenzi

doi:10.51867/ajernet.7.4.133

Authors

Siegfried Maurice Kuwite University of Dar es Salaam, Tanzania https://orcid.org/0009-0003-6050-8586
Neema Mori University of Dar Es Salaam, Tanzania https://orcid.org/0000-0002-2119-2000
Siasa Issa Mzenzi University of Dar Es Salaam, Tanzania https://orcid.org/0000-0003-0624-4412

DOI:

https://doi.org/10.51867/ajernet.7.4.133

Keywords:

Agency Theory, Financial Growth, Small and Medium Enterprises, Stock Market Listing, Signaling Theory

Abstract

Access to growth finance remains a persistent constraint for small and medium enterprises (SMEs) in developing economies. Capital markets can provide an alternative source of long-term finance, but the regulatory, governance and disclosure requirements associated with public listing may impose substantial costs on smaller firms. This study examines whether perceived capital-market listing requirements and SME characteristics influence the financial growth prospects of SMEs in Tanzania. Drawing on Signalling Theory and Agency Theory, the study develops a model linking listing requirements and firm characteristics to SME financial growth. Quantitative data were collected from SMEs participating in the Dar es Salaam Stock Exchange Enterprise Acceleration Programme (DEAP), with 95 usable responses obtained from 100 questionnaires distributed. Partial Least Squares Structural Equation Modelling (PLS-SEM) was used to assess the measurement and structural models. The results show that perceived listing requirements have a statistically significant negative relationship with SME financial growth (β = −0.229, p = 0.032), whereas SME characteristics have a positive relationship with financial growth (β = 0.521, p < 0.001). The model explains 49.0% of the variance in financial growth and demonstrates predictive relevance. The findings suggest that capital-market regulation creates a tension between investor protection and SME accessibility, while organisational capacity enables SMEs to cope with capital-market requirements and strengthen growth prospects. The study contributes Tanzania-specific evidence to the limited literature on SME-oriented capital markets in developing economies.

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