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

Ekote Nelson Nnoko and Yuji Maeda ()
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Ekote Nelson Nnoko: Kwansei Gakuin University
Yuji Maeda: Kwansei Gakuin University

Asia-Pacific Journal of Regional Science, 2023, vol. 7, issue 1, No 5, 119-133

Abstract: 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.

Keywords: Debt financing; Risk; Corporate performance; Japan; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: G32 H63 O14 O57 P17 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s41685-022-00263-6

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