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Access to Finance and Efficiency of Firms in Ghana

Author

Listed:
  • Ferdinand Ahiakpor
  • Issac Dasmani
  • Samuel Kobina Annim
  • Ralph Essem Nordjo

    (University of Ca pe Coast)

Abstract

This paper tests the hypothesis that perceived financial constraints adversely affect output and efficiency of firms. Using 2014 data from the World Bank Enterprise Survey on 270 firms in Ghana, we calculate firm level efficiency scores and identify drivers of efficiency, with perceived barriers to finance being the main explanatory variable. The descriptive statistics show that over two thirds of the firms indicated perceived lack of access to finance as a severe constraint. Using the Cobb Douglas production function cost of labour and raw materials determine output of firms. The second stage least squares regression shows an inverse relationship between perception of access to finance as a barrier and firm level efficiency. While perception does not automatically translate into actual barriers, we infer from this study that either psychological or real financial constraints inhibit the full potential of both output and efficiency of firms in Ghana. We also observe that size of firm really matters in the discourse on output and efficiency of firms. Both sensitization and actual financial capability interventions are therefore imperative for firms’ success.

Suggested Citation

  • Ferdinand Ahiakpor & Issac Dasmani & Samuel Kobina Annim & Ralph Essem Nordjo, 2021. "Access to Finance and Efficiency of Firms in Ghana," The African Finance Journal, Africagrowth Institute, vol. 23(2), pages 22-35.
    • Handle: RePEc:afj:journl:v:23:y:2021:i:2:p:22-35
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-finj_v23_n2_a2
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    More about this item

    Keywords

    Enterprises; Finance; Barriers; Efficiency; Output; and Ghana;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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