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Drever, MF & Armstrong, B 2005, ‘Testing relationships among variables measuring credit management in small and medium-sized enterprises (SMEs)’, paper presented to Small Enterprise Association of Australia and New Zealand : 18th Annual Conference, Armidale, NSW.


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 by these researchers.

This paper describes an exploratory investigation of 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 and the high number of correlations among the items then led to the testing of latent variable models to see if the items were in fact reflective traits of higher order factors. Future analysis will examine the variables using Confirmatory Factor Analysis (CFA) to validate the identifiable models then examine the relationships among the variables discussed in this paper and other demographic items that were used in the survey. The findings reported in this paper describe only the first part of the analysis planned for this study.