Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity

Joseph Yensu; Edmond Oppong-Peprah; Elizabeth Dwomo-Fokuo; Francis Boadu; Anthony Kusi

doi:doi:10.11648/j.jim.20150406.13

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Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity

Joseph Yensu, Edmond Oppong-Peprah, Elizabeth Dwomo-Fokuo, Francis Boadu, Anthony Kusi

Published in Journal of Investment and Management (Volume 4, Issue 6)

Received: 22 July 2015 Accepted: 11 August 2015 Published: 29 August 2015

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Abstract

Financing activities are crucial exercises in any organizational set-up. It has attracted intense debate and scholarly attention in the financial management arena over the years, whether businesses should opt for debt or equity financing to expand their businesses or not. This paper attempts to ascertain the type of finance that family business operators in Ghana use to expand their business using Ashanti Region as the study area.Questionnaires were administered to 148 family businesses in Ghana. Descriptive survey study design was adopted to achieve the envisaged aims of the study. A total of 150 questionnaires were administered but 148 family businesses responded. Generally, the study revealed that founders or owner-managers use equity financing (68.92 %) as a source of start-up capital to commence their business activities. Also, founders or owner-managers admitted that they will only allow external investors (venture capitalist and business angels) to come in, if they would be prepared to offer advice and expertise to them alone, and nothing more.To establish whether family business use debt or equity financing for their expansion activities, a total of seven variables were used to measure the level of acceptance among the family business operators. These variables were analyzed using principle component factor analysis with varimax rotation.Varimax rotation with Kaiser Normalization was done to simplify and minimize the number of factors to achieve meaningful construction. As a result, 7 crucial variables were established as the sources of development finance by family businesses, which include external equity funding (venture capital and business angel), equity (family & friends, partnership) funding, rotational savings, owner’s equity, debt funding, re-invest profits earned, and government support, 4 factors are also established as sources of development finance by family businesses namely internal investment fund, mixed investment fund, external investment fund (funds from non family members) and source from anywhere. The paper seeks to establish that family business operators in Ghana utilize both debt and equity financing (mixed investment) for their business developmental activities. However, the equity financing is limited to family & friends, and partners alone and not private equity investors-venture capitalist and business angels. The study recommends that Ghana Venture Capital Trust Fund and venture capital companies should embark on massive educational and information program on venture capital support activities in order to disseminate the needed information to family business owners concerning the financing options and support services available to them.

Published in	Journal of Investment and Management (Volume 4, Issue 6)
DOI	10.11648/j.jim.20150406.13
Page(s)	301-310
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Family Business, Debt, Equity, Financing and Owner-Manager

References

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APA Style

Joseph Yensu, Edmond Oppong-Peprah, Elizabeth Dwomo-Fokuo, Francis Boadu, Anthony Kusi. (2015). Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity. Journal of Investment and Management, 4(6), 301-310. https://doi.org/10.11648/j.jim.20150406.13

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ACS Style

Joseph Yensu; Edmond Oppong-Peprah; Elizabeth Dwomo-Fokuo; Francis Boadu; Anthony Kusi. Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity. J. Invest. Manag. 2015, 4(6), 301-310. doi: 10.11648/j.jim.20150406.13

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AMA Style

Joseph Yensu, Edmond Oppong-Peprah, Elizabeth Dwomo-Fokuo, Francis Boadu, Anthony Kusi. Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity. J Invest Manag. 2015;4(6):301-310. doi: 10.11648/j.jim.20150406.13

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@article{10.11648/j.jim.20150406.13,
  author = {Joseph Yensu and Edmond Oppong-Peprah and Elizabeth Dwomo-Fokuo and Francis Boadu and Anthony Kusi},
  title = {Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity},
  journal = {Journal of Investment and Management},
  volume = {4},
  number = {6},
  pages = {301-310},
  doi = {10.11648/j.jim.20150406.13},
  url = {https://doi.org/10.11648/j.jim.20150406.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20150406.13},
  abstract = {Financing activities are crucial exercises in any organizational set-up. It has attracted intense debate and scholarly attention in the financial management arena over the years, whether businesses should opt for debt or equity financing to expand their businesses or not. This paper attempts to ascertain the type of finance that family business operators in Ghana use to expand their business using Ashanti Region as the study area.Questionnaires were administered to 148 family businesses in Ghana. Descriptive survey study design was adopted to achieve the envisaged aims of the study. A total of 150 questionnaires were administered but 148 family businesses responded. Generally, the study revealed that founders or owner-managers use equity financing (68.92 %) as a source of start-up capital to commence their business activities. Also, founders or owner-managers admitted that they will only allow external investors (venture capitalist and business angels) to come in, if they would be prepared to offer advice and expertise to them alone, and nothing more.To establish whether family business use debt or equity financing for their expansion activities, a total of seven variables were used to measure the level of acceptance among the family business operators. These variables were analyzed using principle component factor analysis with varimax rotation.Varimax rotation with Kaiser Normalization was done to simplify and minimize the number of factors to achieve meaningful construction. As a result, 7 crucial variables were established as the sources of development finance by family businesses, which include external equity funding (venture capital and business angel), equity (family & friends, partnership) funding, rotational savings, owner’s equity, debt funding, re-invest profits earned, and government support, 4 factors are also established as sources of development finance by family businesses namely internal investment fund, mixed investment fund, external investment fund (funds from non family members) and source from anywhere. The paper seeks to establish that family business operators in Ghana utilize both debt and equity financing (mixed investment) for their business developmental activities. However, the equity financing is limited to family & friends, and partners alone and not private equity investors-venture capitalist and business angels. The study recommends that Ghana Venture Capital Trust Fund and venture capital companies should embark on massive educational and information program on venture capital support activities in order to disseminate the needed information to family business owners concerning the financing options and support services available to them.},
 year = {2015}
}

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TY  - JOUR
T1  - Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity
AU  - Joseph Yensu
AU  - Edmond Oppong-Peprah
AU  - Elizabeth Dwomo-Fokuo
AU  - Francis Boadu
AU  - Anthony Kusi
Y1  - 2015/08/29
PY  - 2015
N1  - https://doi.org/10.11648/j.jim.20150406.13
DO  - 10.11648/j.jim.20150406.13
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 301
EP  - 310
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20150406.13
AB  - Financing activities are crucial exercises in any organizational set-up. It has attracted intense debate and scholarly attention in the financial management arena over the years, whether businesses should opt for debt or equity financing to expand their businesses or not. This paper attempts to ascertain the type of finance that family business operators in Ghana use to expand their business using Ashanti Region as the study area.Questionnaires were administered to 148 family businesses in Ghana. Descriptive survey study design was adopted to achieve the envisaged aims of the study. A total of 150 questionnaires were administered but 148 family businesses responded. Generally, the study revealed that founders or owner-managers use equity financing (68.92 %) as a source of start-up capital to commence their business activities. Also, founders or owner-managers admitted that they will only allow external investors (venture capitalist and business angels) to come in, if they would be prepared to offer advice and expertise to them alone, and nothing more.To establish whether family business use debt or equity financing for their expansion activities, a total of seven variables were used to measure the level of acceptance among the family business operators. These variables were analyzed using principle component factor analysis with varimax rotation.Varimax rotation with Kaiser Normalization was done to simplify and minimize the number of factors to achieve meaningful construction. As a result, 7 crucial variables were established as the sources of development finance by family businesses, which include external equity funding (venture capital and business angel), equity (family & friends, partnership) funding, rotational savings, owner’s equity, debt funding, re-invest profits earned, and government support, 4 factors are also established as sources of development finance by family businesses namely internal investment fund, mixed investment fund, external investment fund (funds from non family members) and source from anywhere. The paper seeks to establish that family business operators in Ghana utilize both debt and equity financing (mixed investment) for their business developmental activities. However, the equity financing is limited to family & friends, and partners alone and not private equity investors-venture capitalist and business angels. The study recommends that Ghana Venture Capital Trust Fund and venture capital companies should embark on massive educational and information program on venture capital support activities in order to disseminate the needed information to family business owners concerning the financing options and support services available to them.
VL  - 4
IS  - 6
ER  -

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Author Information

Joseph Yensu

Institute of Entrepreneurship and Enterprise Development, Kumasi Polytechnic, Kumasi, Ghana
Edmond Oppong-Peprah

Institute of Entrepreneurship and Enterprise Development, Kumasi Polytechnic, Kumasi, Ghana
Elizabeth Dwomo-Fokuo

Institute of Entrepreneurship and Enterprise Development, Kumasi Polytechnic, Kumasi, Ghana
Francis Boadu

Institute of Entrepreneurship and Enterprise Development, Kumasi Polytechnic, Kumasi, Ghana
Anthony Kusi

Institute of Entrepreneurship and Enterprise Development, Kumasi Polytechnic, Kumasi, Ghana

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APA Style

Joseph Yensu, Edmond Oppong-Peprah, Elizabeth Dwomo-Fokuo, Francis Boadu, Anthony Kusi. (2015). Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity. Journal of Investment and Management, 4(6), 301-310. https://doi.org/10.11648/j.jim.20150406.13

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ACS Style

Joseph Yensu; Edmond Oppong-Peprah; Elizabeth Dwomo-Fokuo; Francis Boadu; Anthony Kusi. Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity. J. Invest. Manag. 2015, 4(6), 301-310. doi: 10.11648/j.jim.20150406.13

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AMA Style

Joseph Yensu, Edmond Oppong-Peprah, Elizabeth Dwomo-Fokuo, Francis Boadu, Anthony Kusi. Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity. J Invest Manag. 2015;4(6):301-310. doi: 10.11648/j.jim.20150406.13

Copy | Download

@article{10.11648/j.jim.20150406.13,
  author = {Joseph Yensu and Edmond Oppong-Peprah and Elizabeth Dwomo-Fokuo and Francis Boadu and Anthony Kusi},
  title = {Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity},
  journal = {Journal of Investment and Management},
  volume = {4},
  number = {6},
  pages = {301-310},
  doi = {10.11648/j.jim.20150406.13},
  url = {https://doi.org/10.11648/j.jim.20150406.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20150406.13},
  abstract = {Financing activities are crucial exercises in any organizational set-up. It has attracted intense debate and scholarly attention in the financial management arena over the years, whether businesses should opt for debt or equity financing to expand their businesses or not. This paper attempts to ascertain the type of finance that family business operators in Ghana use to expand their business using Ashanti Region as the study area.Questionnaires were administered to 148 family businesses in Ghana. Descriptive survey study design was adopted to achieve the envisaged aims of the study. A total of 150 questionnaires were administered but 148 family businesses responded. Generally, the study revealed that founders or owner-managers use equity financing (68.92 %) as a source of start-up capital to commence their business activities. Also, founders or owner-managers admitted that they will only allow external investors (venture capitalist and business angels) to come in, if they would be prepared to offer advice and expertise to them alone, and nothing more.To establish whether family business use debt or equity financing for their expansion activities, a total of seven variables were used to measure the level of acceptance among the family business operators. These variables were analyzed using principle component factor analysis with varimax rotation.Varimax rotation with Kaiser Normalization was done to simplify and minimize the number of factors to achieve meaningful construction. As a result, 7 crucial variables were established as the sources of development finance by family businesses, which include external equity funding (venture capital and business angel), equity (family & friends, partnership) funding, rotational savings, owner’s equity, debt funding, re-invest profits earned, and government support, 4 factors are also established as sources of development finance by family businesses namely internal investment fund, mixed investment fund, external investment fund (funds from non family members) and source from anywhere. The paper seeks to establish that family business operators in Ghana utilize both debt and equity financing (mixed investment) for their business developmental activities. However, the equity financing is limited to family & friends, and partners alone and not private equity investors-venture capitalist and business angels. The study recommends that Ghana Venture Capital Trust Fund and venture capital companies should embark on massive educational and information program on venture capital support activities in order to disseminate the needed information to family business owners concerning the financing options and support services available to them.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - Financing the Expansion of Family Businesses in Ghana: Which Way to Go, Debt or Equity
AU  - Joseph Yensu
AU  - Edmond Oppong-Peprah
AU  - Elizabeth Dwomo-Fokuo
AU  - Francis Boadu
AU  - Anthony Kusi
Y1  - 2015/08/29
PY  - 2015
N1  - https://doi.org/10.11648/j.jim.20150406.13
DO  - 10.11648/j.jim.20150406.13
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 301
EP  - 310
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20150406.13
AB  - Financing activities are crucial exercises in any organizational set-up. It has attracted intense debate and scholarly attention in the financial management arena over the years, whether businesses should opt for debt or equity financing to expand their businesses or not. This paper attempts to ascertain the type of finance that family business operators in Ghana use to expand their business using Ashanti Region as the study area.Questionnaires were administered to 148 family businesses in Ghana. Descriptive survey study design was adopted to achieve the envisaged aims of the study. A total of 150 questionnaires were administered but 148 family businesses responded. Generally, the study revealed that founders or owner-managers use equity financing (68.92 %) as a source of start-up capital to commence their business activities. Also, founders or owner-managers admitted that they will only allow external investors (venture capitalist and business angels) to come in, if they would be prepared to offer advice and expertise to them alone, and nothing more.To establish whether family business use debt or equity financing for their expansion activities, a total of seven variables were used to measure the level of acceptance among the family business operators. These variables were analyzed using principle component factor analysis with varimax rotation.Varimax rotation with Kaiser Normalization was done to simplify and minimize the number of factors to achieve meaningful construction. As a result, 7 crucial variables were established as the sources of development finance by family businesses, which include external equity funding (venture capital and business angel), equity (family & friends, partnership) funding, rotational savings, owner’s equity, debt funding, re-invest profits earned, and government support, 4 factors are also established as sources of development finance by family businesses namely internal investment fund, mixed investment fund, external investment fund (funds from non family members) and source from anywhere. The paper seeks to establish that family business operators in Ghana utilize both debt and equity financing (mixed investment) for their business developmental activities. However, the equity financing is limited to family & friends, and partners alone and not private equity investors-venture capitalist and business angels. The study recommends that Ghana Venture Capital Trust Fund and venture capital companies should embark on massive educational and information program on venture capital support activities in order to disseminate the needed information to family business owners concerning the financing options and support services available to them.
VL  - 4
IS  - 6
ER  -

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