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Empirical Economics

, Volume 57, Issue 3, pp 957–970 | Cite as

Firm financial performance in Sub-Saharan Africa: the role of ethnic diversity

  • Sefa Awaworyi ChurchillEmail author
Article

Abstract

Using data from Sub-Saharan Africa, this research note examines the effect of ethnic and linguistic diversity on firms’ financial performance. We measure diversity using indices of fractionalization based on the Herfindahl-type formula and find evidence of a strong positive effect of diversity on firm performance indicators such as total revenue, dividends, earnings before interest and tax, net sales/turnover and return on assets and total factor productivity. We argue that the positive effect is driven by the influence of ethnic diversity on important channels such as innovation and entrepreneurship. Our results are robust to alternative measures of fractionalization and endogeneity.

Keywords

Ethnic diversity Firm performance Profits Africa 

JEL Classification

J15 M13 L25 

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of Economics, Finance and MarketingRMIT UniversityMelbourneAustralia

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