<scp>SMEs</scp>' diversification of financing sources: Strategy or desperation?

The paper's objective is to provide a large sample evidence on small and medium enterprises' (SMEs) financing source diversification patterns. We use the World Bank Enterprise Survey (WBES) of SMEs from 135 developing emerging economies. find that extent significantly affected by firm-specific country-specific characteristics. Commonly, (unconstrained) specialise their in retained earnings. However, experiencing financial constraints often rely diversified sources. theoretical justification empirical quadratic relationship between diversification: moderate degree most sources financing. This finding, combined with financially unconstrained fewer sources, suggests strategic choice based optimal complementarity achieved through credit multiplier channel.