The impact of financial constraints on investment efficiency in South Africa

Oluwaseyi Olopade, Beatrice Desiree Simo-Kengne () and Abieyuwa Ohonba

Economics and Business Letters, 2022, vol. 11, issue 3, 125-133

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.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ove:journl:aid:17172

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