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Firm financial performance in Sub-Saharan Africa: the role of ethnic diversity

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  • Sefa Awaworyi Churchill

    (RMIT University)

Abstract

Using data from Sub-Saharan Africa, this research note examines the effect of ethnic and linguistic diversity on firms’ financial performance. We measure diversity using indices of fractionalization based on the Herfindahl-type formula and find evidence of a strong positive effect of diversity on firm performance indicators such as total revenue, dividends, earnings before interest and tax, net sales/turnover and return on assets and total factor productivity. We argue that the positive effect is driven by the influence of ethnic diversity on important channels such as innovation and entrepreneurship. Our results are robust to alternative measures of fractionalization and endogeneity.

Suggested Citation

  • Sefa Awaworyi Churchill, 2019. "Firm financial performance in Sub-Saharan Africa: the role of ethnic diversity," Empirical Economics, Springer, vol. 57(3), pages 957-970, September.
    • Handle: RePEc:spr:empeco:v:57:y:2019:i:3:d:10.1007_s00181-018-1463-2
    DOI: 10.1007/s00181-018-1463-2
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    Cited by:

    1. R. Isil Yavuz & Berrak Bahadir, 2022. "Remittances, ethnic diversity, and entrepreneurship in developing countries," Small Business Economics, Springer, vol. 58(4), pages 1931-1952, April.
    2. Yonatan Dinku & Dereje Regasa, 2021. "Ethnic Diversity and Local Economies," South African Journal of Economics, Economic Society of South Africa, vol. 89(3), pages 348-367, September.

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    More about this item

    Keywords

    Ethnic diversity; Firm performance; Profits; Africa;
    All these keywords.

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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