Determinants of micro and small enterprises financial performance in the non-farm sector of Ghana: A quantile regression approach

Figures & data

Table 1. Measurement of variables and descriptive statistics (Mean and standard deviations)

Variables	Descriptions	Observations	Mean	Std. Dev.
Dependent variable
Profit	Annual profit (GHS)	1887	1306.42	3204.74
Explanatory variables
Entrepreneurial resource
Male	Sex of business owner; 1=male, 0=otherwise	1887	0.28	0.45
Age	Age of business owner (number of years)	1887	42.37	13.18
Age_squared	Square of the business owner’s age	1887	1969.04	1261.74
No_education	Owner of enterprise had formal education (1=yes, 0 =otherwise)	1887	0.19	0.39
Technical_education	Owner of enterprise had technical education (1=yes, 0=otherwise)	1887	0.03	0.17
Tertiary_education	Owner of enterprise had tertiary education (1=yes, 0=otherwise)	1887	0.02	0.14
Enterprise resource
Age_enterprise	Age of business (number of years business had operated)	1718	9.16	8.58
Age_enterprise square	Age of business (number of years of operation) squared	1718	157.62	324.95
Months_operated	Number of months enterprise operated in the past 12 months	1887	11.28	2.02
Credit	Access to credit (1=if enterprise had access to credit, 0=otherwise)	1775	0.12	0.32
Assets	Total value of enterprise assets (GHS)	1887	480.63	1822.28
Registered	Formal registration (1=if enterprise is formally registered, 0=otherwise)	1750	0.13	0.34
Apprentices	Number of apprentices	1887	0.11	0.62
Casual_labour	Number of casual employees	1887	0.19	0.73
Hired_labour	Number of hired employees	1887	0.69	0.97
House_holdlabour	Household labour (1=if enterprise use household labour, 0=otherwise)	1887	0.06	0.24
Geographical/location characteristics
Urban	Location of enterprise (1=urban, 0=otherwise)	1887	0.49	0.50
Savannah_zone	Ecological zone of enterprise (1=Savannah zone, 0=otherwise)	1887	0.24 0.43
Forest_zone	Ecological zone of enterprise (1=Forest zone, 0=otherwise)	1887	0.46 0.50
Coastal_zone	Ecological zone of enterprise (1=Coastal zone, 0=otherwise)	1887	0.30 0.40
Sub-Sector
Manufacturing	Food products, beverages, apparel, footwear etc (1=manufacturing, 0=otherwise)	1873	0.26	0.44
Trade	Whole trade and retail enterprises (1=trade enterprise, 0=otherwise)	1876	0.56	0.50
Restaurants	Restaurants, bars and canteens (1=restaurant enterprise, 0=otherwise)	1873	0.10	0.29
Services	Road transport, hair dressing, carpentry, masonry (1=service enterprise, 0=otherwise)	1886	0.10	0.30

Table 2. OLS and quantile regression estimates of non-farm enterprise financial performance in Ghana

Variable	OLS	0.1	0.2	0.3	0.4	0.5	0.6	0.7	0.8	0.9
Entrepreneurial resources
Male	964.4***	74.65**	145.2***	204.9***	300.8***	412.5***	517.3***	825.2***	1,061***	1,660***
	(199.40)	(37.83)	(33.36)	(48.75)	(62.16)	(75.01)	(107.50)	(152.30)	(232.50)	(367.00)
Age	14.14	1.94	3.27	5.02	7.99	18.37**	12.12	9.21	17.10	−82.52**
	(22.71)	(5.29)	(4.95)	(6.00)	(6.96)	(9.04)	(12.61)	(15.30)	(26.54)	(37.89)
Age_squared	−0.377*	0.03	0.06	0.09	−0.129*	−0.239***	−0.207*	0.19	0.01	0.51
	(0.23)	(0.06)	(0.05)	(0.06)	(0.07)	(0.09)	(0.12)	(0.16)	(0.25)	(0.34)
No_education	217.10	30.42	0.81	13.70	22.42	17.18	14.49	25.98	224.20	172.00
	(207.80)	(26.02)	(24.92)	(32.04)	(43.34)	(51.13)	(74.87)	(100.80)	(142.70)	(277.40)
Technical	243.10	150.60	257.0**	272.9**	323.7**	259.7*	184.20	228.00	201.80	356.70
	(308.00)	(139.80)	(100.50)	(129.10)	(142.20)	(149.20)	(198.30)	(305.40)	(605.80)	(840.00)
Tertiary	428.70	1048.00	64.50	11.74	1.22	206.30	208.70	612.70	339.60	214.60
	(553.10)	(1828.00)	(535.30)	(228.40)	(246.20)	(314.90)	(433.60)	(472.60)	(569.30)	(1321.00)
Enterprise resources
age_enterprise	57.33***	0.17	2.48	9.199*	11.05	9.60	12.38	28.66**	49.63***	136.7***
	(19.12)	(3.90)	(3.62)	(4.77)	(6.77)	(7.46)	(9.19)	(12.14)	(18.14)	(31.20)
age_enterprise^2	−0.941**	0.03	0.01	0.14	0.13	0.01	0.04	0.40	−0.835**	−2.181***
	(0.42)	(0.11)	(0.09)	(0.14)	(0.19)	(0.21)	(0.23)	(0.26)	(0.38)	(0.66)
Months_operated	51.23	9.29	17.19***	25.18***	36.97***	49.41***	55.42***	59.98**	73.78***	54.85
	(49.91)	(6.53)	(5.82)	(7.31)	(10.43)	(13.65)	(19.22)	(24.41)	(27.51)	(78.23)
Credit	48.72	2.04	14.67	2.91	6.51	8.18	15.53	72.42	15.88	85.25
	(229.90)	(69.55)	(33.71)	(35.24)	(47.30)	(61.54)	(76.47)	(110.30)	(151.50)	(356.80)
Assets	0.159**	0.01	0.07	0.112***	0.160***	0.187***	0.185***	0.159**	0.19	0.45
	(0.07)	(0.05)	(0.05)	(0.04)	(0.05)	(0.04)	(0.03)	(0.06)	(0.13)	(0.44)
Registered	304.80	19.52	36.24	−82.47*	−123.3*	94.41	6.43	185.10	684.3*	591.70
	(226.40)	(58.96)	(38.01)	(45.73)	(68.13)	(89.27)	(154.90)	(192.80)	(360.80)	(512.20)
Apprentices	46.65	6.26	7.03	8.56	23.76	36.17	29.87	29.03	69.91	142.50
	(106.50)	(66.15)	(28.00)	(34.22)	(35.83)	(34.87)	(44.92)	(68.40)	(105.30)	(508.60)
Casual_labour	345.3**	31.34	28.71	19.23	20.30	69.95	133.30	241.3*	356.10	824.3*
	(168.90)	(49.60)	(30.93)	(46.91)	(60.71)	(64.41)	(105.20)	(130.10)	(312.90)	(482.60)
Hired_labour	276.9**	53.39**	86.38***	113.9***	170.6***	222.1***	289.7***	339.6***	510.8***	761.6***
	(109.20)	(24.56)	(27.15)	(28.36)	(38.65)	(48.36)	(64.19)	(66.96)	(145.20)	(188.20)
Household_labour	210.90	15.12	44.40	19.09	25.51	31.21	40.25	96.37	121.30	325.20
	(298.10)	(65.96)	(53.83)	(102.20)	(81.79)	(101.20)	(144.20)	(245.00)	(371.00)	(551.30)
Location factors
Urban	562.6***	31.73	61.70**	97.64***	162.2***	240.7***	351.8***	436.8***	517.5***	658.3***
	(147.60)	(25.52)	(27.18)	(36.92)	(45.25)	(52.89)	(78.51)	(98.23)	(134.70)	(220.70)
Savannah	262.00	27.11	38.36	−74.23*	−128.4**	−156.6**	94.23	62.53	125.90	275.90
	(192.00)	(35.98)	(30.18)	(39.03)	(50.00)	(63.40)	(86.31)	(121.80)	(167.60)	(338.40)
Forest	40.19	1.48	18.19	53.93	76.08	−114.5**	121.60	157.10	−368.8**	314.10
	(143.70)	(33.32)	(29.63)	(40.91)	(49.07)	(55.86)	(74.36)	(96.05)	(143.10)	(235.10)
Sub-Sector variables
Manufacturing	372.0*	72.41	84.09	32.74	121.1*	161.8**	179.40	293.4*	561.0***	754.9**
	(217.00)	(49.49)	(58.16)	(57.03)	(63.85)	(70.40)	(120.60)	(151.90)	(208.40)	(371.80)
Trade	903.6***	33.50	85.49	90.36	178.4***	279.4***	408.9***	550.7***	886.6***	1,407***
	(248.50)	(48.54)	(61.76)	(56.99)	(59.55)	(68.82)	(125.30)	(146.30)	(216.80)	(346.00)
Restaurants	624.9**	18.98	59.72	49.61	198.7**	261.7***	390.7***	429.1**	646.5***	1,318***
	(263.80)	(72.46)	(69.60)	(73.63)	(78.28)	(98.52)	(137.80)	(173.40)	(249.70)	(460.60)
Constant	−1,233*	−137.20	−216.0*	−264.6*	−486.4**	−865.0***	−773.3**	−766.5*	197.80	1290.00
	(718.90)	(136.30)	(127.80)	(156.30)	(195.80)	(241.70)	(342.60)	(460.70)	(618.20)	(1280.00)
Observations	1479	1479	1479	1479	1479	1479	1479	1479	1479	1479
R sq (Pseudo)	0.12	0.01	0.03	0.04	0.06	0.08	0.10	0.11	0.12	0.18
Entrepreneurial resources	7.97***
Enterprise resources	3.07***
Both entrepreneurial and enterprise	4.84***
Sub-sector characteristics	5.47***
Joint F-test of location variables	5.49***

OLS estimation was done using robust standard errors whiles standard errors for quantiles were bootstrapped based on 1000 replication. Standard errors are reported below the estimates in parenthesis.

Figure 1. Profit distribution by enterprise age and number of months operated.

Figure 2. Distribution of enterprise profits in deciles with respect to hired and casual labour.

Figure 3. Distribution of profits in deciles by sub-sector.

Table A1. Inter-quantile range regression for selected quantiles

Variable	0.1 0.2	0.2 0.3	0.3 0.4	0.4 0.5	0.5 0.6	0.6 0.7	0.7 0.8	0.8 0.9
Entrepreneurial resources
Male	70.55**	59.71*	95.91**	111.7**	104.80	307.9***	235.60	599.5**
	(33.70)	(34.25)	(41.10)	(48.07)	(65.48)	(99.90)	(160.40)	(291.00)
Age	1.32	1.75	2.97	10.39*	−6.26	−2.91	−26.31	−65.42**
	(4.49)	(4.30)	(4.47)	(6.03)	(7.98)	(10.96)	(19.59)	(32.02)
Age_square	(−0.02)	−0.03	−0.04	−0.110*	0.03	0.02	0.20	0.498*
	(0.05)	(0.04)	(0.05)	(0.06)	(0.08)	(0.11)	(0.18)	(0.29)
No_education	−31.23	−12.89	−8.73	39.61	−2.69	−40.47	−198.2*	52.22
	(24.33)	(25.30)	(31.96)	(33.38)	(49.41)	(66.85)	(103.90)	(211.70)
Technical	106.40	15.87	50.86	−64.05	−75.46	43.75	−26.20	155.00
	(116.60)	(89.34)	(96.89)	(101.70)	(141.00)	(209.80)	(469.30)	(634.80)
Tertiary	983.63	76.24	−12.96	207.50	2.46	404.00	−273.10	−125.00
	(1673.99)	(570.00)	(206.90)	(197.90)	(275.00)	(323.10)	(463.30)	(1149.00)
Enterprise resources
age_enterprise	2.30	6.724*	1.85	−1.45	2.78	16.28**	20.98*	87.09***
	(3.22)	(3.50)	(4.23)	(4.64)	(6.03)	(8.24)	(12.65)	(25.12)
age_enterprise2	−0.04	−0.13	0.01	0.13	−0.03	−0.362**	−0.435*	−1.346***
	0.09	(0.10)	(0.12)	(0.13)	(0.16)	(0.18)	(0.26)	(0.50)
Months_operations	7.90	7.99	11.79*	12.44	6.01	4.56	13.80	−18.93
	(6.85)	(5.28)	(6.83)	(8.25)	(11.72)	(15.39)	(20.07)	(60.96)
Credit	12.63	−11.76	3.60	1.67	7.35	−87.96	88.30	−101.10
	(53.10)	(29.18)	(31.38)	(40.83)	(51.26)	(77.35)	(111.60)	(287.10)
Assets	0.06	0.05	0.05	0.03	0.00	−0.03	0.03	0.27
	(0.04)	(0.03)	(0.04)	−1.45	(0.03)	(0.05)	(0.12)	(0.36)
Registered	−55.75	−46.23	−40.86	28.92	100.80	178.70	499.2*	−92.64
	(42.99)	(33.65)	(49.26)	(59.87)	(112.80)	(132.70)	(271.30)	(446.20)
Apprentices	0.77	1.53	15.20	12.41	−6.30	−58.90	−40.88	−72.56
	(58.82)	(22.35)	(25.00)	(25.91)	(32.25)	(48.10)	(129.60)	(466.40)
Casual_labour	2.62	9.49	39.53	49.65	63.39	108.00	114.70	468.20
	(38.17)	(34.28)	(38.59)	(39.12)	(62.74)	(102.90)	(254.80)	(379.50)
Hired_labour	32.99	27.55	56.63**	51.49*	67.60*	49.96	171.20	250.8*
	(23.33)	(18.54)	(25.41)	(28.79)	(36.44)	(44.56)	(104.40)	(141.50)
Household_labour	−59.52	63.49	6.42	5.70	−71.47	136.60	−217.70	−203.90
	(57.74)	(76.47)	(72.25)	(71.14)	(102.40)	(167.80)	(271.40)	(400.40)
Location factors
Urban	29.97	35.94	64.60**	78.46**	111.1**	85.01	80.70	140.80
	(24.13)	(26.00)	(30.59)	(34.66)	(50.53)	(64.42)	(96.28)	(176.50)
Savannah	−11.25	−35.87	−54.16	−28.19	62.35	31.70	−63.35	401.80
	(30.78)	(29.95)	(33.95)	(39.79)	(55.96)	(79.53)	(123.00)	(261.40)
Forest	−19.67	−35.74	−22.15	−38.43	−7.05	−35.51	−211.7**	54.65
	(29.42)	(27.88)	(31.97)	(36.20)	(49.00)	(63.40)	(103.50)	(188.10)
Sub-Sector variables
Manufacturing	11.68	−51.36	88.33*	40.70	17.65	114.00	267.5*	193.90
	(49.12)	(44.70)	(47.21)	(50.15)	(82.00)	(108.80)	(153.70)	(287.60)
Trade	51.99	4.87	88.02*	101.0**	129.50	141.80	335.9**	520.6*
	(49.29)	(45.00)	(46.06)	(48.17)	(82.73)	(104.70)	(151.70)	(274.80)
Restaurants	40.73	−10.10	149.0**	63.03	129.10	38.36	217.40	671.4*
	(63.49)	(57.62)	(60.91)	(66.79)	(94.49)	(122.40)	(172.50)	(391.20)
Constant	−78.77	−48.63	−221.8*	−378.6**	91.73	6.82	568.70	1488.00
	(129.18)	(114.50)	(124.70)	(159.80)	(224.70)	(304.00)	(469.30)	(1022.00)
Observations	1479	1479	1479	1479	1479	1479	1479	1479

Standard errors are reported below the estimates in parenthesis. OLS was estimated using robust standard errors whiles standard errors for quantiles are bootstrapped based on 1000 replications. *, ** and *** are levels of significance at 10%, 5% and 1%, respectively.

Table A2. OLS regression results by gender and location

Variable	Male	Female	Urban	Rural
Entrepreneurial resource
Male	-	-	1,239***	610.8***
	-	-	(349.80)	(181.00)
Age	−5.39	23.50	−10.52	42.29**
	(49.83)	(24.39)	(46.14)	(20.84)
Age_square	(0.25)	−0.422*	(0.28)	−0.525**
	(0.51)	(0.24)	(0.46)	(0.22)
No_education	390.80	116.00	146.10	211.30
	(524.00)	(199.60)	(433.30)	(221.90)
Technical	529.50	169.40	−24.96	625.50
	(632.30)	(264.10)	(444.70)	(465.70)
Tertiary	−1314.00	−80.47	−211.10	−1697.00
	(1107.00)	(584.10)	(633.20)	(1293.00)
Enterprise resources
age_enterprise	108.7***	40.72	100.1***	17.65
	(41.59)	(25.13)	(34.83)	(20.31)
age_enterprise2	−1.671**	−0.85	−1.671*	−0.18
	(0.77)	(0.79)	(0.87)	(0.38)
Months_operations	100.90	46.85	42.08	42.38
	(169.80)	(35.25)	(110.30)	(40.87)
Credit	72.11	−126.10	−422.10	173.20
	(587.70)	(244.80)	(410.20)	(194.40)
Assets	0.136*	0.19	0.12	0.259*
	(0.08)	(0.12)	(0.07)	(0.15)
Registered	311.40	292.60	435.90	49.34
	(426.00)	(250.70)	(343.50)	(306.50)
Apprentices	227.40	−90.22*	(16.96)	194.30
	(245.40)	(51.37)	(146.30)	(173.40)
Casual_labour	511.8**	279.90	651.9**	24.94
	(232.20)	(223.10)	(314.50)	(100.50)
Hired_labour	165.70	327.3***	304.3*	314.7**
	(204.10)	(125.40)	(158.10)	(139.40)
Household_labour	461.20	81.59	39.96	507.00
	(766.50)	(329.60)	(361.30)	(509.70)
Location
Savannah	728.00	2.43	494.30	157.80
	(538.00)	(176.60)	(403.80)	(182.60)
Forest	253.90	(144.40)	71.11	(42.64)
	(343.70)	(153.40)	(253.80)	(133.00)
Sub-Sector
Manufacturing	100.60	286.10	621.3*	29.67
	(325.00)	(223.60)	(340.90)	(275.10)
Trade	1,502***	448.9**	1,202***	442.90
	(423.40)	(221.90)	(352.50)	(320.00)
Restaurants	(580.60)	397.20	667.80	224.60
	(430.60)	(257.70)	(452.00)	(315.30)
Urban	1,033***	388.8***	-	-
	(387.60)	(129.40)	-	-
Constant	(1265.00)	(833.50)	(405.90)	−1,313*
	(2110.00)	(601.90)	(1526.00)	(750.50)
Observations	414.00	1065.00	707.00	772.00
R-squared	0.14	0.09	0.12	0.14
F	2.64***	3.37***	4.13***	2.82***