Financing Constraints, Earning Quality and Investment Efficiency: Evidence from Africa

Financing Constraints, Earning Quality and Investment Efficiency: Evidence from Africa

abdurahman_aliyi_ibrahim

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Abdurahman Aliyi Ibrahim

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Man Wang

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Dongbei University of Finance and Economics

Financing Constraints, Earning Quality and Investment Efficiency: Evidence from Africa

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Abstract

This study investigates the effect of financing constraints on investment efficiency in developing countries and how this relationship is conditional to the earning quality. We use the non-financial firms from 15 Africa countries from 2009 to 2018. We employed panel data analysis and classified the sample into a financially constrained and unconstrained firm to analyze this relationship. The results show that financing constraints affect investment efficiency; this effect is more pronounced in constrained firms than unconstrained firms. We evidenced that investment efficiency is more sensitive to cash flows for the financially constrained firm than the unconstrained firms. Our findings also posit that constrained firms are more likely to overinvest than unconstrained firms because of their internal cash flows. In contrast, unconstrained firms are more likely to under invest than constrained firms.

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No external funding was declared for this work.

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The authors declare no conflict of interest.

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How to Cite This Article

abdurahman_aliyi_ibrahim. 2021. \u201cFinancing Constraints, Earning Quality and Investment Efficiency: Evidence from Africa\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 21 (GJMBR Volume 21 Issue C2).

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GJMBR Volume 21 Issue C2

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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification JEL Code: G11

Submission ReceivedJune 8, 2021
Peer Review Double Blind
Handling Editor
Accepted July 2, 2021
Published July 15, 2021

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March 19, 2021

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