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…
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.
Details
Keywords
Charles Amo-Yartey and Joshua Abor
– The paper aims to study the importance of financial market development and financial structure in explaining the financial policies of firms in emerging market countries.
Abstract
Purpose
The paper aims to study the importance of financial market development and financial structure in explaining the financial policies of firms in emerging market countries.
Design/methodology/approach
The paper uses a panel data of 32 countries and the system generalized method of moments approach.
Findings
The analysis shows that stock market development is associated with higher use of external finance relative to internal finance, while bond market development is associated with lower use of external finance relative to internal finance. The findings of this study also indicate that stock market development tends to shift the policies of firms towards less debt and more equity, and bond market development is associated with higher debt and less equity in emerging economies.
Originality/value
The value of this study is in respect of its contribution to the extant literature on corporate financial policies in emerging market economies.