Government procurement contracts, external audit certification, and financing of small- and medium-sized enterprises

Kelvin Mugambi Kinyua, Frederick Kibon Changwony () and Kevin Campbell
Additional contact information
Kelvin Mugambi Kinyua: Co-opTrust Investment Services Limited
Frederick Kibon Changwony: University of Stirling
Kevin Campbell: University of Stirling

Small Business Economics, 2025, vol. 64, issue 3, No 14, 1163-1231

Abstract: Abstract Entrepreneurs worldwide often face obstacles in financing their businesses, hindering their ability to grow. Government procurement offers an opportunity to access lucrative contracts and benefit from a procurement auditing process that could enhance access to finance. Likewise, externally audited financial statements can enhance credibility and lessen financing hurdles. We examine whether government procurement contracts and external audit certifications jointly influence financing access and whether ownership, size, and firm age matter. We find that access to finance is more likely to be an obstacle to the operations of small- and medium-sized enterprises (SMEs) with government procurement contracts than those without such contracts, regardless of whether they seek external audit certification. Additionally, the effect of external audit certification on the likelihood of access to finance being an obstacle to SME operations reduces sharply with foreign ownership, size, and age for SMEs involved in government procurement. We also find that the impact of government procurement contracts reverses for SMEs in low- and lower-middle-income countries. Our findings have policy implications, especially with the growing implementation of affirmative action programs to promote the involvement of SMEs in government procurement.

Keywords: External audit; Government contracts; Small and medium-sized enterprises; Access to financing; World Bank Enterprise Survey (search for similar items in EconPapers)
JEL-codes: D25 H57 L21 L26 M41 M42 M48 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11187-024-00940-0 Abstract (text/html)
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:kap:sbusec:v:64:y:2025:i:3:d:10.1007_s11187-024-00940-0

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/11187/PS2

DOI: 10.1007/s11187-024-00940-0

Access Statistics for this article

Small Business Economics is currently edited by Zoltan J. Acs and David B. Audretsch

More articles in Small Business Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().