Entrepreneurship and Financial Development in Africa: The Role of Institutional Quality

Afees O. Noah ()
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Afees O. Noah: Vanderbijlpark Campus

A chapter in New Perspectives and Paradigms in Applied Economics and Business, 2025, pp 71-91 from Springer

Abstract: Abstract The drive for entrepreneurship is widespread globally, but success rates vary, often linked to disparities in financial development and institutional quality. Addressing the barrier of capital scarcity, debates persist on the precise impact of financial development on entrepreneurship activity, most especially in the African context. This study looks into the issue by examining how financial development influences entrepreneurship activities in Africa and exploring how institutional quality can enhance this nexus. Utilizing panel data from 28 African nations spanning 2006–2020, the study employs the system generalized method of moment (SGMM) technique. Results indicate that institutional quality significantly promotes entrepreneurship activities in Africa. Moreover, financial development is shown to stimulate entrepreneurship, with institutional quality enhancing this relationship. Notably, institutional quality and financial development act synergistically, fostering entrepreneurship in Africa. The findings underscore the potential for African countries to leverage strong institutions to promote the development of their financial sectors and enhance entrepreneurship activities.

Keywords: Africa; Entrepreneurship; Financial development; Institutional quality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-77363-1_6

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DOI: 10.1007/978-3-031-77363-1_6

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