Effect of financial stability on new business establishments in Africa: does ease of doing business matter?

Abstract

Purpose

Given the relevance of entrepreneurship in nation-building, studies geared towards the promotion of new businesses are crucial. This study aims to contribute to the finance and entrepreneurship literature by providing empirical evidence on the role ease of doing business plays in promoting new business establishments amidst financial stability.

Design/methodology/approach

The study used the fixed and random effect estimation techniques as well as the impulse response function to analyse annual panel data covering 53 African countries.

Findings

The results indicate that regulatory quality and access to electricity promote new business establishments. Also, to experience the direct effect of financial stability on new business establishments or entrepreneurship in Africa, the role of the ease of doing business cannot be isolated. The policy implication is that the creation of an enabling business environment is crucial for new business establishments.

Research limitations/implications

The sample only includes countries in Africa. Future or further studies may want to expand the sample size and also consider a comparative analysis where this analysis will be done plus another region so that the differences in findings can be known.

Originality/value

To the best of the authors’ knowledge, this is the first study to investigate the role of ease of doing business on new business establishments in the presence of financial stability in Africa.