The impact of financial constraints on investment efficiency in South Africa
Keywords:investment efficiency, financial constraints, panel data
Shifts from firm-level investment efficiency occur due to market imperfections and information
asymmetry. This translates to an increased cost of capital, which leads to over or under-investments. This study demonstrates the absence of a direct association between investment
efficiency and financial constraints in African firms, complementing the efficient market
hypothesis. We observed firms across different industries listed on the JSE from 2009 to 2019.
Empirical results from panel data analysis reveal that financial constraints drive improved
investment levels and firms in this region depend on external funds – specifically credits – to
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