Measure Models explaining the Credit Management Constructs for the small and medium-sized enterprises (SMES)

This paper describes the relationships among a set of items used to measure the management of credit in small and medium-sized enterprises (SMEs). The data was obtained from a survey of SMEs located on the Mid North Coast of NSW, conducted in 2000. The relationships among the items were initially examined using correlation analysis. The high number of correlations among the items then led to the testing of measurement models to see if the items were in fact reflective traits of higher order factors. Small business failure has been the subject of considerable research effort (Beaver, 1966: Berryman, 1983: Holmes, 1988: Bickerdyke, 2000). Peel and Wilson (1996) found that there was a substantial amount of both theoretical and empirical small business research relating to credit management and its relationship to the failure of small businesses. However, there does not seem to be much research that focuses on sorting out the relationships among the many measures of credit management that have been used buy these researchers. The identification of underlying constructs and their ref.ective indicators provides an important way forward for researchers choosing to examine these types of measures in future research. The use of measurement models is also an easier analytical path to take when attempting to sort out relationships among sets of highly correlated variables.