Short essay on empirical finance research: Current trends and a call for future studies

Abstract

Corporate finance practice is a function that deals with the financing needs of a company. In this paper, a critical survey was conducted to identify the key literature in order to isolate the leading theoretical and empirical issues surrounding company financing and capital structure that are particularly relevant for developing economies. The paper aims to take stock of existing knowledge in the area and identify the main strands of theoretical and empirical literature, considering the policy implications of existing knowledge, and spelling out the current policy problems which should be addressed by future research. The suggested areas resulted purely from a PhD research conducted in the area of construction finance in Ghana. The methodology adopted for the main PhD work involved multiple research approach. The empirical investigation was conducted using structured interviews and survey questionnaire. The interviews were conducted prior to the survey to solicit in-depth information about the financing practices and constraints of these large contractors. The interviews led to the identification of key issues which were not mentioned in literature. These concerns were later investigated and tested using survey questionnaires. Conforming to the orthodoxy of purposive and cluster sampling techniques, the dataset was obtained from 49 large construction firms operating in Ghana. The consideration of overlapping aspects of the study largely motivated the use of factor analysis to analyse the data which made it possible to make scientific deductions, descriptions and built explanations from the results. The development of regression models using explanatory variables such as financial condition of the firm, macro-economic indicators, bankruptcy cost, financial risk, transaction cost and financial policy to establish the relationship between the corresponding dependent variables (thus, equity finance and debt finance) together with the management and sustainability of suitable financing programme for construction firms in Ghana recommended policy problems further research.