Firm financial performance in Sub-Saharan Africa: the role of ethnic diversity

Sefa Awaworyi Churchill

Empirical Economics, 2019, vol. 57, issue 3, No 9, 957-970

Abstract: Abstract Using data from Sub-Saharan Africa, this research note examines the effect of ethnic and linguistic diversity on firms’ financial performance. We measure diversity using indices of fractionalization based on the Herfindahl-type formula and find evidence of a strong positive effect of diversity on firm performance indicators such as total revenue, dividends, earnings before interest and tax, net sales/turnover and return on assets and total factor productivity. We argue that the positive effect is driven by the influence of ethnic diversity on important channels such as innovation and entrepreneurship. Our results are robust to alternative measures of fractionalization and endogeneity.

Keywords: Ethnic diversity; Firm performance; Profits; Africa (search for similar items in EconPapers)
JEL-codes: J15 L25 M13 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00181-018-1463-2

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