Small business finance in Sub‐Saharan Africa: the case of Ghana

Abstract

Purpose

This paper aims to examine how unlisted companies in Ghana finance their growth and to what extent do they rely on internal finance relative to external sources of finance. Additionally, the paper seeks to investigate the determinants of the capital structure of unlisted companies in Ghana.

Design/methodology/approach

The paper uses the Singh‐Hamid methodology as well as panel data techniques to evaluate the financing decisions of unlisted companies in Ghana.

Findings

The analysis shows that unlisted firms in Ghana finance most of their growth from external debt and they are also characterized by shorter debt maturity. The results also show that the dominant factors affecting the debt equity ratios of unlisted firms in Ghana are size, firm growth, tangibility, profit margin, and financial development.

Research limitations/implications

Overall, the evidence in this paper suggests that standard models of corporate finance can be applicable to unlisted companies in Ghana.

Practical implications

Informative when planning for future development of the small business sector of the Ghanaian economy.

Originality/value

Provides empirical evidence on how unlisted companies in Ghana finance their growth and what determines their capital structure.

Citation

Amo Yartey, C. (2011), "Small business finance in Sub‐Saharan Africa: the case of Ghana", Management Research Review, Vol. 34 No. 2, pp. 172-185. https://doi.org/10.1108/01409171111102795