ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

Alternative investments as a financing tool for small and medium enterprises

Thomas Poufinas and Maria Polychronou

Correspondence: Thomas Poufinas,

Department of Economics, Democritus University of Thrace, Greece

pdf (944.16 Kb) | doi:


Alternative investments more than ever have come to the spotlight as they have attracted over the last few years the interest of asset owners and asset managers. The former are nothing but individual or institutional investors, such as pension schemes. The latter are the individuals or organizations that direct or allocate the available assets to the appropriate securities. Over the last decade there has been a shift from traditional, listed equity and fixed income to venture capital - private equity, private debt, exchange traded funds, and other investment means, also known as alternative investments. In this paper we investigate the parameters that affect small and medium enterprise financing through exchange traded funds and venture capital. We employ econometric models to find the link between the exchange traded funds and venture capital that invest in small and medium enterprises in a country and the economy of the relevant country. We find that the overall condition of the economy of a country as represented by the macroeconomic figures and certain indices is important for the choice of the country for the domiciliation, size or availability of exchange traded funds and venture capital.


  alternative investments, exchange traded funds, venture capital, small and medium enterprises, financing.


Beck, T. and Demirguc-Kunt, A. (2006), Small and medium-size enterprises: Access to finance as a growth constraint, Journal of Banking & Finance, 30 (11), 2931–2943.

Beck, T., Demirguc-Kunt, A. and Maksimovic, V. (2008), Financing patterns around the world: Are small firms different?, Journal of Financial Economics, 89 (3), 467-487.

Beck, T., Demirguc-Kunt, A. and Singer, D. (2013), Is Small Beautiful? Financial Structure, Size and Access to Finance, World Development, 52, 19-33.

Bloomberg (2016), ETF data, June 2016.

Boscoianu M., Prelipean, G., Calefariu E. and Lupan, M. (2015), Innovative instruments for SME financing in Romania - a new proposal with interesting implications on markets and institutions, Procedia Economics and Finance 32, 240 – 255.

Eurostat (2016), Tax revenue statistics, index. php/Tax_revenue_statistics#Further_Eurostat_information (2016).

Fowowe, B. (2017), Access to finance and firm performance: Evidence from African countries, Review of Development Finance 7, 6-17.

Geronikolaou, G. and Papachristou, G. (2012), Venture Capital and Innovation in Europe, Modern Economy, 3, 454-459.

Harper, J.T., Madura, J. and Schnusenberg (2006), Performance comparison between exchange-traded funds and closed-end country funds, Int. Fin. Markets, Inst. and Money, No. 16 (2006), 104–122.

ICI RESEARCH PERSPECTIVE (2014), Understanding Exchange-Traded Funds: How ETFs Work, Vol. 20, No. 5, September 2014,

Invest Europe (2015), 2015 European Private Equity Activity, Statistics on Fundraising, Investments & Divestments, May 2016,

Jeng, L.A. and Wells, P.C. (2000), The determinants of venture capital funding: evidence across countries, Journal of Corporate Finance, No. 6 (2000), 241–289.

Kaufmann D. and Kraay A (2016), The Worldwide Governance Indicators (WGI) project, The World Bank,, (2016).

Kenney, M. (2000), Note on “Venture Capital”, Berkeley Roundtable on the International Economy, BRIE Working Paper 142.

Kersten, R., Harms., J., Liket, K. and Maas, K. (2017), Small Firms, large Impact? A systematic review of the SME Finance Literature, World Development, 97, 330-348.

Koske, I., I.Wanner, R. Bitetti and O. Barbiero (2015), “The 2013 update of the OECD product market regulation indicators: policy insights for OECD and non-OECD countries”, OECD Economics Department Working Papers, No. 1200 (2016).

Lee, N., Sameen H. and Cowling, M. (2015), Access to finance for innovative SMEs since the financial crisis, Research Policy, 44 (2), 370-380.

Mayer, C., Schoors, K. and Yafeh, Y. (2005), Sources of funds and investment activities of venture capital funds: evidence from Germany, Israel, Japan and the United Kingdom, Journal of Corporate Finance, No. 11 (2005), 586 – 608.

Miller, T. and Kim A. B. (2016), Index of Economic Freedom – Promoting Economic Opportunity and Prosperity, Institute for Economic Freedom and Opportunity, The Heritage Foundation – In partnership with The Wall Street Journal (2016).

OECD (2011, 2012, 2013, 2014, 2015, 2016), Entrepreneurship at a glance (2011, 2012, 2013, 2014, 2015, 2016).

OECD (2016a), Data, (2016).

OECD (2016b), Data, (2016).

OECD (2016c), Overall statutory tax rates on dividend income, (2016).

Poufinas, T. and Kouskouna, E. (2017), On the split of social security contributions between funded and pay-as-you-go pension schemes; contribution to growth, The Greek Debt Crisis - In Quest of Growth in Times of Austerity, Palgrave – Macmillan, 129-152.

Quartey, P., Turkson, E., Abor, J. Y. and Iddrisu, A. M. (2017), Financing the growth of SMEs in Africa: What are the contraints to SME financing within ECOWAS?, Review of Development Finance 7, 18-28.

Rupeika-Apoga, R. (2014), Alternative financing of SMEs in the Baltic States: myth or reality?, Procedia - Social and Behavioral Sciences, 156, 513 – 517.

Sarker, S. R. (2017), Small and Medium Enterprise Financing, The Cost and Management, No 45 (2), 2-8.

Shin S. and Soydemir, G. (2010), Exchange-traded funds, persistence in tracking errors and information dissemination, Journal of Multinational Financial Management, J. of Multi. Fin. Manag., No. 20 (2010), 214–234.

The World Bank (2016), Data Extract from World Development Indicators, http://data.worldbank .org/indicator/CM.MKT.LCAP.CD (2016).

Trading Economics (2016),, July 4, 2016.