The determinants of financial structure: How to explain the “paradox of insolvency and debt” among SMEs in Cameroon?

Jean-Paul Tchankam, Jules Roger Feudjo and Serge Valant Gandja

Research in International Business and Finance, 2016, vol. 36, issue C, 73-84

Abstract: The paradox of insolvent enterprises regularly contracting new debts is the motivation behind this research. Statistical tests carried out on a sample of 62 manufacturing firms show that the financial behaviour of these enterprises is mainly explained by two factors: the rate of asset immobilization and the manager's social capital. The impact of the first factor is due to the asset capacity to serve guarantees, and the impact of the second is inherent to the possibility that enables relational networks to get around norms or to reach informal circuits and alternative sources of financing. The latter aspect is the beginning of the answer to the insolvency and indebtedness paradox. This result denotes the coexistence of two parallel dimensions in the Cameroon business environment. Besides the formal sphere, where the lack of confidence and readability between the actors pushes financial backers to excesses of prudence, subsists an informal universe where confidence, loyalty and solidarity seem to cement business relationships. However, the economic rationality of actors in these networks remains problematic.

Keywords: Financial structure; Ownership structure; Social capital; SME (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:36:y:2016:i:c:p:73-84

DOI: 10.1016/j.ribaf.2015.09.013

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