Microenterprise financing preference

Eric Osei‐Assibey, Godfred A. Bokpin and Daniel Twerefou

Journal of Economic Studies, 2012, vol. 39, issue 1, 84-105

Abstract: Purpose - The purpose of this paper is to investigate the determinants of financing preference of micro and small enterprises (MSEs) whilst distinguishing a broader range of financing sources beyond what is typically the case within the corporate finance literature. Design/methodology/approach - Under the framework of ordinal logistic regression, the paper also tests whether there is evidence of hierarchical preference ordering as predicted by pecking order theory (POH) using field survey data for 2009. Findings - The authors relate that new enterprises are more likely to prefer low cost and less risky or less formal financing such as internal or bootstrap finances. However, as the enterprise gets established or matures, its capacity to seek formal financing increases, thereby becoming more likely to prefer or being in a higher category of formal financing. While the paper affirms the POH, it is argued that this order is a consequence of severe persistent constraints other than sheer preference. The findings further reveal that, microentrepreneur's and MSE's‐specific level socio‐economic characteristics such as owner's education or financial literacy status, households tangible assets, ownership structure, enterprise size, as well as sensitivity to high interest rates in the credit market, to be important determinants of either past (start‐up), present or future financing preference. Originality/value - The main value of this paper is to analyse the determinants of financing preference of MSEs within the context of rural financial market (RFM) from a developing country perspective.

Keywords: Ghana; Developing countries; Financing; Financing preference; Micro enterprises; Small enterprises; Pecking order theory (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:v:39:y:2012:i:1:p:84-105

DOI: 10.1108/01443581211192125

Access Statistics for this article

Journal of Economic Studies is currently edited by Prof Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().