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Impacts and risks of borrowing on corporate performance: evidence from Japan and Sub-Saharan Africa

Author

Listed:
  • Ekote Nelson Nnoko

    (Kwansei Gakuin University)

  • Yuji Maeda

    (Kwansei Gakuin University)

Abstract

Borrowing constitutes the capital structure of a firm. Also, impacts of borrowing on corporate performance differ from one nation to another. This study used data and multiple regression analysis to determine the impacts and sensitivity of borrowing on related risks in corporate performance. Data included a sample of manufacturing companies from the Tokyo Stock Exchange (TSE) and manufacturing companies from some top stock exchanges in Sub-Saharan Africa (SSA) from 2016 to 2019. The results showed that borrowing affects corporate performance. Due to differences in interest rate, inflation rate, governance and fluctuating economic conditions, impacts and risks of borrowing in SSA are higher than in Japan. The results also indicated that financial performance can be optimized by mitigating interest rate risk, exchange rate risk, market risk and fluctuations in economic conditions. In conclusion, the negative impacts of borrowing on corporate performance are more substantial in SSA than in Japan.

Suggested Citation

  • Ekote Nelson Nnoko & Yuji Maeda, 2023. "Impacts and risks of borrowing on corporate performance: evidence from Japan and Sub-Saharan Africa," Asia-Pacific Journal of Regional Science, Springer, vol. 7(1), pages 119-133, March.
    • Handle: RePEc:spr:apjors:v:7:y:2023:i:1:d:10.1007_s41685-022-00263-6
    DOI: 10.1007/s41685-022-00263-6
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    More about this item

    Keywords

    Debt financing; Risk; Corporate performance; Japan; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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