Pepperdine University Graziadio School Study Shows Small Privately-Held Businesses Desire a Strong Dollar; Large Privately-Held Businesses Prefer Weak Dollar
In advance of Chairman of the Federal Reserve Ben Bernanke’s testimony on monetary policy to Congress, small, privately-held business respondents say a stronger US dollar is more beneficial to the economy
An economic forecast survey from Pepperdine University’s Graziadio School of Business and Management shows 36.7% of small privately-held businesses (less than $5 million in revenue) believe that a stronger dollar is beneficial to the financial health of US privately-held businesses in 2011. Conversely, the highest percentage reported among larger businesses (35.5%) say that a weak dollar is more beneficial for privately-held businesses.
Desire for a weak dollar grew with the size of the business. In fact, for entities greater than $100 million in annual revenue, 43.4% say a weaker dollar is better for the economy versus 31.8% who indicate a stronger dollar is better.
In total, the survey among 1,224 privately-held businesses, capital suppliers, intermediaries, and service providers collected January 3-11, 2011 by the Pepperdine Private Capital Markets Project, found that 39.1% of respondents identified a weak dollar as beneficial to businesses financial health as compared to 35.3% who viewed a weak dollar negatively.
50.6% of respondents believed that US monetary policy will have a positive impact on US GDP in the next 12 months while 52.8% of respondents feel foreign monetary policy will have a negative impact on US GDP in the next 12 months.
This data has been released on the heels of Federal Reserve Chairman Bernanke’s critical testimony of China’s monetary policy. On March 1st and 2nd Bernanke will give his semi-annual monetary policy testimony before Congress. Bernanke is likely to field extensive questions on the Federal Reserves’ plan to purchase $600 billion of Treasuries and Treasury-inflation protected securities.
“With increasing stability and strong revenues among larger U.S. companies, it is time for small private businesses to start to benefit from actions that level the playing field with foreign markets and strengthen the dollar,” said Dr. John Paglia, lead researcher of the Pepperdine Private Capital Markets Project and associate professor of finance at Pepperdine University’s Graziadio School of Business and Management. “Small private businesses have hung on by a thread for more than two years as larger businesses experienced growth due to the Federal government’s policies and stimulus measures.”
In fact, separate but related data from the Pepperdine Private Capital Markets Project revealed a large number of small private business (80.3%) owners did not agree that the economic stimulus measures put forth to benefit businesses in the U.S. over the past year have been fairly distributed between publicly-traded and privately-held companies. Only 10.6% said they agreed that economic stimulus measures have been fairly distributed and even fewer (9.1%) said publicly-traded companies received less than a fair allocation.
“In order to bring down unemployment and grow the economy stimulus measures must make their way to America’s job creators, small business,” said Dr. Paglia. “I believe that previous stimulus measures have stabilized the economy and we now see the Fed focused on bringing down persistent unemployment.”
With over 99% of companies having fewer than 500 employees, our economy is dependent upon the success of small businesses. The Pepperdine Private Capital Markets Project is a critical step along the path of understanding and increasing the value of private companies and our economy.
Professionals who work in the lending or investment arenas either for an institution or a specific fund are excellent bellwethers of what is ahead for other businesses and consumers. Through two survey cycles and published summary reports per year, lenders, investors and the businesses that depend on them will be able to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized.
The economic forecast study of private capital markets is available at: http://bschool.pepperdine.edu/privatecapital.