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Examining the Risks Associated with Corporate Borrowing on Business Growth: The Case for Manufacturing Companies in Lusaka, Zambia

Author

Listed:
  • Gladys Muhanga

    (University of Zambia)

  • Euston Kapotwe

    (University of Zambia)

Abstract

TCorporate borrowing is a critical financing strategy for firm growth, yet it exposes organizations to risks that may undermine performance. This study investigates the risks associated with corporate borrowing and their implications for business growth among manufacturing firms in Lusaka, Zambia. Using a mixed-method design, the study surveyed 40 firms and conducted interviews with financial managers. Quantitative analysis employed descriptive statistics and regression models, while qualitative data were analyzed thematically. The findings reveal that excessive reliance on short-term borrowing increases liquidity constraints and financial distress, while interest rate volatility and exchange rate fluctuations further erode profitability. Debt overhang was also identified as a barrier to investment in profitable projects. The study concludes that although corporate borrowing can stimulate growth, inadequate financial planning and weak risk management amplify negative outcomes. Recommendations include adopting comprehensive risk assessment frameworks, diversifying financing options, and strengthening governance practices. The study contributes to literature on corporate finance in developing economies by offering evidence from Zambia’s manufacturing sector, where research on borrowing risks remains limited.

Suggested Citation

  • Gladys Muhanga & Euston Kapotwe, 2025. "Examining the Risks Associated with Corporate Borrowing on Business Growth: The Case for Manufacturing Companies in Lusaka, Zambia," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 6(6).
    • Handle: RePEc:cwk:ajocsk:2025-07
    DOI: 10.59413/ajocs/v6.i6.7
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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