Do lenders value firm reputation? Evidence from SMEs in Ghana

Abstract

Our paper examined the effects of firm reputation on access to external funding among small and medium-sized enterprises (SMEs) in Ghana by controlling for firm specific variables such as firm size, firm performance, leverage and managerial competence. It contributes to our knowledge on how firm reputation, especially organisation identity, assists firms in accessing external funding. We analyzed primary data of 423 SMEs registered in the Accra Metropolis of Ghana using regression analysis. Even though, we documented positive relationship between firm reputation and access to finance, only firm image was significant. This denotes that firm reputation could assist SMEs in accessing external financing if SME managers develop and improve their information and communication practices to highlight tangible evidences of firm success. This could be achieved by keeping proper books of accounts on firm operations, which could reduce lenders’ perception of risk and thus, facilitate easier access to external funding.