Factors influencing risk attitudes of entrepreneurs in Ghana: the role of gender

Motivated by the recent increases in entrepreneurship in developing countries, this empirical article aims at determining the risk preferences of male and female entrepreneurs using cross-sectional data from 161 MSMEs in Ghana, and the Arrow-Pratt risk model. A multiple linear regression was later employed to ascertain factors influencing entrepreneurs’ attitudes toward risk. A decomposition of the risk attitude shows Ghanaian entrepreneurs to be generally risk averse. Upon further investigation, we find males to be more extreme risk averse than females, while females are more risk neutral than males. The gender difference in risk aversion is significantly explained by predictor variables, such as socio-economic factors, having access to funds, type of business operated, sector of operation, financial knowledge, and the cultural values of the entrepreneurs. We find a positive relationship between financial knowledge and attitude toward risk, and recommend the need for investment in both formal and informal education that increases the financial knowledge of entrepreneurs, hence, reduce the risk associated with entrepreneurship in Ghana. Theoretically, the article integrates cultural, financial knowledge, and religious variables into the determinant of risk attitude of male and female entrepreneurs and practically demonstrates that increasing the financial knowledge decreases the risk aversion nature of entrepreneurs.