Debt Financing, Information Sharing, and Profitability: Evidence from Listed Firms from an Emerging Economy

ABSTRACT

This study investigates how credit information sharing conditions debt financing to boost the profitability of 20 listed enterprises on the Ghana Stock Exchange between 2003 and 2013. We employ robust least squares and simultaneous bootstrapping models in a panel setting. Our findings show that the impact of debt financing on profitability increases when it is subject to information sharing and takes the shape of short, long, and total debts. In the worst-case situation, contingent debt financing reduces the negative impact of debt financing on profitability. Therefore, authorities must adopt laws and legislation that deepen, widen, and strengthen credit information sharing to offset the negative impact of information asymmetry on loan financing and business profitability.

KEYWORDS:

• Credit information sharing
• debt financing
• profitability
• listed firms
• Ghana

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Net Effect = debt financing coefficient + [interactive term coefficient X mean of credit information sharing coverage].