Determinants of SMEs’ financial performance: evidence from an emerging economy

Financial performance (FP) is important to every firm, especially SMEs, but FP determinants are debatable. This paper investigates determinants of FP among Ghanaian SMEs. Employing a survey data set of 238 SMEs, multiple regression analysis was performed to determine the extent to which each firm-specific characteristic and industry impact FP. The findings show that a significant relationship exists between company ownership type and FP. There is also a positive link between firm age, firm size, and FP. The industry effect is significant in the service sector. The results also show that the impact of firm-specific characteristics and industry differs across the sub-components of FP and manufacturing and service industries. The results demonstrate the relevance of the tenets of resource base view and structure-conduct-performance in explaining the SMEs' FP variations in a developing country’s context. The managerial and policy implications of the findings for both sectors have been discussed.