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How do we explain the capital structure of SMEs in sub‐Saharan Africa?

Author

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  • Joshua Abor
  • Nicholas Biekpe

Abstract

Purpose - The purpose of this study is to examine the determinants of capital structure decisions of small and medium enterprises (SMEs) in Ghana. The issue is very relevant considering that SMEs have been noted as important contributors to the growth of the Ghanaian economy. Design/methodology/approach - Regression model is used to estimate the relationship between the firm level characteristics and capital structure measured by long‐term debt and short‐term debt ratios. Findings - The results of the study suggest that variables such as firm's age, size, asset structure, profitability, and growth affect the capital structure of Ghanaian SMEs. Short‐term debt is found to represent an important financing source for SMEs in Ghana. Originality/value - The findings of this study have important implications for policy makers and entrepreneurs of SMEs in Ghana.

Suggested Citation

  • Joshua Abor & Nicholas Biekpe, 2009. "How do we explain the capital structure of SMEs in sub‐Saharan Africa?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(1), pages 83-97, January.
    • Handle: RePEc:eme:jespps:v:36:y:2009:i:1:p:83-97
    DOI: 10.1108/01443580910923812
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    Citations

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    Cited by:

    1. James Agyei & Shaorong Sun & Eugene Abrokwah, 2020. "Trade-Off Theory Versus Pecking Order Theory: Ghanaian Evidence," SAGE Open, , vol. 10(3), pages 21582440209, July.
    2. Andreas Mueller & Luca Sensini, 2023. "Determinants of Financing Decisions of SMEs: Evidence from Hotel Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(3), pages 117-117, April.
    3. Amber Theeuwen & Valérie Duplat & Christopher Wickert & Brian Tjemkes, 2021. "How Do Women Overcome Gender Inequality by Forming Small-Scale Cooperatives? The Case of the Agricultural Sector in Uganda," Sustainability, MDPI, vol. 13(4), pages 1-25, February.
    4. Aamer Shahzad & Muhammad Azeem & Mian Sajid Nazir & Xuan Vinh Vo & Nguyen T. M. Linh, 2021. "The determinants of capital structure: Evidence from SAARC countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6471-6487, October.
    5. Reindolf Yao Nani Adzido & Emmanuel Kwame Ahiave & Victor Yao Kamasah & Vivian Akoto & Onesimus Kwashie Dorkpah, 2016. "Assessing Financial Openness and Access to Credit Facilities: The Case of Banks in Ho, Ghana," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(3), pages 47-57, July.
    6. Le, Hoang Duc & Viet, Nguyen Quang & Anh, Nguyen Huaong, 2021. "Trade-Off Theory and Pecking Order Theory: Evidence from Real Estate Companies in Vietnam," OSF Preprints hc6ne, Center for Open Science.
    7. Ashraf, Dawood & Rizwan, Muhammad Suhail & Azmat, Saad, 2021. "Not one but three decisions in sukuk issuance: Understanding the role of ownership and governance," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    8. suhardi, suhardi & Afrizal, Afrizal, 2019. "Bagaimanapecking-Order Theory Menjelaskan Struktur Permodalan Bank Di Indonesia? [How Does The Pecking-Order Theory Explain The Bank'S Capital Structure In Indonesia?]," MPRA Paper 93963, University Library of Munich, Germany, revised 14 Jan 2019.
    9. Coronel Pangol, Katherine & Orden Cruz, Carmen & Paule Vianez, Jéssica, 2022. "Bibliometric analysis of alternative financing for entrepreneurship," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    10. John MacCarthy & Helena Ahulu, 2019. "Does Capital Structure Affects Firms’ Performance in Ghana? Panel Data Analysis," Accounting and Finance Research, Sciedu Press, vol. 8(4), pages 131-131, November.
    11. Hayelom Abrha Meressa, 2022. "Micro- and small-scale enterprises’ financing preference in line with POH and access to credit: empirical evidence from entrepreneurs in Ethiopia," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-30, December.
    12. Mulindi, Hillary & Josea, Kiplangat & Tiriongo, Samuel, 2022. "What drives MSME's credit choices? Business versus personal loan account utilization in Kenya," KBA Centre for Research on Financial Markets and Policy Working Paper Series 55, Kenya Bankers Association (KBA).
    13. Faisal Buyinza & Anthony Tibaingana & John Mutenyo, 2018. "Factors Affecting Access to Formal Credit by Micro and Small Enterprises in Uganda," ICAE Working Papers 83, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    14. Ashraf, Dawood & Rizwan, Muhammad Suhail & Azmat, Saad, 2018. "The Role of Ownership and Governance Mechanism in Sukuk Financing by Malaysian Firms: An Application of A Double Selection Model," Working Papers 2018-2, The Islamic Research and Teaching Institute (IRTI).
    15. ShiXue He & Marcel Ausloos, 2017. "Impact of the Global Crisis on SME Internal vs. External Financing in China," Papers 1707.06635, arXiv.org.
    16. Faisal Buyinza & John Mutenyo & Anthony Tibaingana, 2018. "Factors Affecting Access to Formal Credit by Micro and Small Enterprises in Uganda," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 4(4), pages 405-424, October.
    17. Ana Milena Padilla Ospina & Jorge Alberto Rivera Godoy & Javier Humberto Ospina Holguín, 2015. "Determinantes de la estructura de capital de las mipymes del sector real participantes del Premio Innova 2007-2011," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 7(2), pages 359-380, July.
    18. Azhar Abdul Rahman, 2018. "Quality of Information and the Moderating Effect of Board Size on SME Financial Structure: Malaysian Evidence," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 851-859:2.
    19. Luís Pacheco & Fernando Tavares, 2017. "Capital structure determinants of hospitality sector SMEs," Tourism Economics, , vol. 23(1), pages 113-132, February.
    20. Jędrzejczak-Gas Janina, 2017. "Determinants of the capital structure of TSL sector enterprises," Management, Sciendo, vol. 22(1), pages 122-139, September.
    21. Mats Håkan Wilhelmsson, 2017. "The effect of house prices on business start-ups: A review and analysis using Swedish regional data," REGION, European Regional Science Association, vol. 4, pages 1-16.
    22. Rashid Khalil* & Dr. Mohd. Sollehudin Bin Shuaib & Dr. Suhaimi Bin Ishak, 2018. "Bank-SMEs Relationship: A Critical Review of Firm & Industry Specific Determinants Influencing Banks’ Performance," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 4(12), pages 777-791, 12-2018.
    23. Tian Hongyun & William Adomako Kankam & Florence Appiah-Twum & Isaac Gumah Akolgo, 2019. "Effect of Social Capital on Firm Performance: The Role of Entrepreneurial Orientation and Dynamic Capability," International Review of Management and Marketing, Econjournals, vol. 9(4), pages 63-73.
    24. Vlora Prenaj & Iliriana Miftari & Besnik Krasniqi, 2023. "Determinants of the Capital Structure of Non-Listed Companies in Kosovo," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 36-50.

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