The effect of small business financing decision on business performance in Ghana: the moderated mediation role of corporate governance system

Purpose The paper aims to investigate the role of corporate governance in the relationship between small businesses financing choice decisions on the business performance. Design/methodology/approach The paper was situated within the financial growth cycle theory and stewardship theory and survey approach was adopted for data collection. The statistical analysis was conducted by using partial least square structural equation modelling. Findings The results indicate that the interaction of corporate governance and financing choice decisions strengthens the performance relationship. Further, corporate governance mediates the positive relationship between financing choice decisions and performance. Thus, suggesting that corporate governance can carry the effect of the financing choice decisions to business performance. Practical implications The findings of our research reveal that, small businesses who follow solid corporate governance procedures should expect higher business performance. This is because financing decisions alone will not assure positive business performance unless they are tied to a broader perspective of effective corporate governance practices. Originality/value To the best of the authors’ knowledge, this is the first study that contributes to the small business financing choice and performance literature by combining the strengths of financial growth cycle theory and stewardship theory to explain the financing choice decisions and, in particular, the role of corporate governance in the relationship. Further, the study is unique in its nature because it presents a successful model for small businesses in emerging economies to concentrate more on the role of corporate governance in enhancing business performance.