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The impact of financial constraints on investment efficiency in South Africa

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  • Oluwaseyi Olopade
  • Beatrice Desiree Simo-Kengne
  • Abieyuwa Ohonba

Abstract

Shifts from firm-level investment efficiency occur due to market imperfections and information asymmetry. This translates to an increased cost of capital, which leads to over or under-investments. This study demonstrates the absence of a direct association between investment efficiency and financial constraints in African firms, complementing the efficient market hypothesis. We observed firms across different industries listed on the JSE from 2009 to 2019. Empirical results from panel data analysis reveal that financial constraints drive improved investment levels and firms in this region depend on external funds – specifically credits – to invest.

Suggested Citation

  • Oluwaseyi Olopade & Beatrice Desiree Simo-Kengne & Abieyuwa Ohonba, 2022. "The impact of financial constraints on investment efficiency in South Africa," Economics and Business Letters, Oviedo University Press, vol. 11(3), pages 125-133.
    • Handle: RePEc:ove:journl:aid:17172
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/17172
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    References listed on IDEAS

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