Factors Influencing Risk Management Decision of Small and Medium Scale Enterprises in Ghana

Abstract

This research seeks to study the factors that enhance or preclude owners of SMEs in Ghana in making risk management decisions. The study was conducted with managers of SMEs in four regions in Ghana. The researchers adopted a quantitative approach and employed STATA 10 and SPSS version 20 in the analysis. Stratified and simple random sampling techniques were used to select the sample units. The probit model was used in the analysis of data. A total of 447 SMEs were sampled for the study, with at least 111 from each of the selected regions. The probit results show that the demographic factors indicate a positive influence on the likelihood that managers will take risk management decisions. All of the business related demographic factors are significant at various levels and positive, except for risk-loving. The economically related factors, such as the estimated amount at risk, the estimated cost of risk management and the estimated total monthly income after tax all have a positive influence on risk management decision making. However, government and tax policies are perceived to negatively influence risk management decisions by managers. We recommend that institutions working closely with SMEs acquire the expertise to train the managers of SMEs on risk management practices.

Small and medium size enterprise: Access the financial and non-financial factors

“…This research employed Ordinary Least Squared (OLS) to examine the association between the independent variables; including financial, management, marketing, technological, and government policy and regulations and the dependent variables; namely SMEs performance. The results show that all independent factors had statistically significant effect on SMEs performance, this results is consistent with previous studies results (Bouazza et al, 2015;Amwele, 2013;Abotsi et al, 2014). In general, it can be concluded that the financial factors, management factors, marketing factors, technological factors, and government policy and regulations have maintained positive statistically significant effect on SMEs performance.…”

“…SMEs are accounted for 90% of the worlds enterprises and provide employment opportunities of about 50% of the organized employment (Word Bank Group, 2017). Researchers concentrated on investigating different factors influencing the performance of SMEs in developed and developing countries (Margaretha & Supartika, 2016;Farrokh et al, 2016;Abotsi et al, 2014;Kinyua, 2014;Amwele, 2013). In Jordan, SMEs form a pivotal role in production and operation, employment, income generation and innovation to achieve the economic goals for which they were created.…”

Socio-economic sourcing: benefits of small business set-asides in public procurement

“…To the best of our knowledge, these ex-ante transaction costs for evaluating small businesses during the supplier selection process have never been quantified, and have never been compared to non-small business suppliers. Additionally, buyers who are obligated to set aside sourcing dollars for small businesses perceive greater transaction costs as a result, a fact which drives buyer behavior to reduce transaction costs by using a simplified source selection method (Abotsi et al, 2014;Edvardsson and Teitsdóttir, 2015;Rocha et al, 2015). Lastly, while a common paradigm is held among buyers that selecting small firms poses additional supplier performance risk (Ivory, 2012) as the final outcome (that is, greater transaction costs to rectify performance problems ex post), we find no extant empirical studies of this postulate.…”

Power Outages and Production Efficiency of Firms in Africa

“…Moreover the International Labor Organization (ILO) (2014) reports that African economic growth rate in 2013 proved too low to generate sufficient employment opportunities for a rapidly growing population, (ILO, 2014). Meanwhile the engine through which the growth objectives of developing countries can be achieved are these firms (Abotsi et al, 2014). Therefore the need to explore the influence of power outages on firm production efficiencies cannot be overemphasized.…”