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Industry classification and the capital structure of Ghanaian SMEs

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  • Joshua Abor

Abstract

Purpose - This study seeks to examine the effect of industry classification on the capital structure of SMEs in Ghana. Design/methodology/approach - The analytical technique employed is regression framework with various capital structure measures as dependent variables, and with industry as the independent variable. Analysis of variance (ANOVA) and other non‐parametric tests were also used to examine the differences in the capital structure of the SMEs across industries. Findings - The results of this study indicate that SMEs in the agricultural sector exhibit the highest capital structure and asset structure or collateral value, while the wholesale and retail trade industry have the lowest debt ratio and asset structure. The regression results indicate that agriculture and pharmaceutical and medical industries depend more on long‐term and short‐term debt than does the manufacturing sector. Information and communication, and wholesale and retail trade sectors are more likely to use short‐term credit than the manufacturing sector. The results also show that the construction and mining industry is less likely to depend on short‐term debt, while hotel and hospitality depend more on long‐term debt and less on short‐term finance. The results clearly indicate that industry effect is important in explaining the capital structure of SMEs and that there are variations in capital structure across the various industries. Originality/value - The main value of this paper is the analysis of the effect of industry classification on SMEs' capital structure from the Ghanaian perspective. The study provides insights on the financing behaviour of SMEs across various industries in Ghana.

Suggested Citation

  • Joshua Abor, 2007. "Industry classification and the capital structure of Ghanaian SMEs," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 24(3), pages 207-219, August.
    • Handle: RePEc:eme:sefpps:v:24:y:2007:i:3:p:207-219
    DOI: 10.1108/10867370710817392
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    Citations

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    Cited by:

    1. Zuriadah Ismail & Mohd Nazir Md Zabit & Mohamad Ali Roshidi Ahmad & Anuar Sarun & Sharul Effendy Janudin, 2017. "The Effect of Switching Business Focus on Share Returns Predictability," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(12), pages 25-38, December.
    2. Alhassan Musah & Erasmus Dodzi Gakpetor & Portia Pomaa, 2018. "Financial Management Practices, Firm Growth and Profitability of Small and Medium Scale Enterprises (SMEs)," Information Management and Business Review, AMH International, vol. 10(3), pages 25-37.
    3. Ardjouman Diabate & Brou Mathias Allate & Dongping Wei & Liying Yu, 2019. "Do Firm and Entrepreneur Characteristics Play a Role in SMEs’ Sustainable Growth in a Middle-Income Economy like Côte d’Ivoire?," Sustainability, MDPI, vol. 11(6), pages 1-20, March.
    4. Musamali, M. Martin & Daniel Kipkirong Tarus, 2013. "Does Firm Profile Influence Financial Access among Small and Medium Enterprises in Kenya?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(6), pages 714-723, June.
    5. Ghouri, Arsalan Mujahid & Akhtar, Pervaiz & Haq, Mirza A. & Mani, Venkatesh & Arsenyan, Gayane & Meyer, Martin, 2021. "Real-time information sharing, customer orientation, and the exploration of intra-service industry differences: Malaysia as an emerging market," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    6. Samal Kokeyeva & Petr Hajek & Ainagul Adambekova, 2022. "Small Firms’ Capital Structure and Performance," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 128-144.
    7. Zélia Serrasqueiro & Manuel Armada & Paulo Nunes, 2011. "Pecking Order Theory versus Trade-Off Theory: are service SMEs’ capital structure decisions different?," Service Business, Springer;Pan-Pacific Business Association, vol. 5(4), pages 381-409, December.
    8. Mertzanis, Charilaos, 2017. "Family ties and access to finance in an Islamic environment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 48(C), pages 1-24.
    9. Luís Pacheco & Fernando Tavares, 2017. "Capital structure determinants of hospitality sector SMEs," Tourism Economics, , vol. 23(1), pages 113-132, February.
    10. Kampouris, Ilias & Mertzanis, Charilaos & Samitas, Aristeidis, 2022. "Foreign ownership and the financing constraints of firms operating in a multinational environment," International Review of Financial Analysis, Elsevier, vol. 83(C).
    11. Muktar Abdela Shifa & Kenenisa Lemmi Debela & Endalew Gutu Tarfa, 2019. "Determinants Of The Profitability Of Commercial Banks In Ethiopia," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(4), pages 185-201.
    12. Lindner, Thomas & Klein, Florian & Schmidt, Stefan, 2018. "The effect of internationalization on firm capital structure: A meta-analysis and exploration of institutional contingencies," International Business Review, Elsevier, vol. 27(6), pages 1238-1249.
    13. Christine Avortri & Alhassan Bunyaminu & T. B. Wereko, 2013. "Factors That Hinder Access to Credit by Small and Medium Scale Enterprises despite the Financial Sector Liberalisation in Ghana," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 1(10), pages 386-404.
    14. Abudu Braimah & Yinping Mu & Isaac Quaye & Alhassan Abubakar Ibrahim, 2021. "Working Capital Management and SMEs Profitability in Emerging Economies: The Ghanaian Case," SAGE Open, , vol. 11(1), pages 21582440219, February.

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