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Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Government procurement contracts,external audit certification, and financing of small and medium-sized enterprises
Author(s): Changwony, Fredrick
Kinyua, Kelvin
Campbell, Kevin
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Keywords: External audit
Government contracts
Small and medium-sized enterprises
Access to financing
World Bank Enterprise Survey
Issue Date: 28-Jun-2024
Date Deposited: 1-Jul-2024
Abstract: Entrepreneurs worldwide often face obstacles in financing their businesses, hindering their ability to sustain and grow them over time. Government procurement offers these entrepreneurs an opportunity to access lucrative contracts and benefit from the procurement auditing process that could enhance access to finance. Likewise, since many small businesses lack dependable financial statements, seeking the services of an external auditor to authenticate them can enhance their credibility while lessening financing hurdles. We examine whether government procurement contracts and external audit certifications jointly influence financing access and whether ownership, size, and firm age matter. Using 102,031 firm-year observations from 151 countries for the period 2007-2021, we find that SMEs without government procurement contracts are less likely to face obstacles in accessing financing than those with such contracts, regardless of whether they seek external audit certification. Additionally, the effect of external audit certification on the likelihood of not facing financing obstacles increases sharply with foreign ownership, size, and age among SMEs not involved in government procurement. We also find that the impact of government procurement contracts reverses for SMEs in low and lower-middle-income countries. Our findings have policy implications, especially with the growing implementation of affirmative action programs to promote the involvement of SMEs and other marginalized groups in government procurement.
DOI Link: 10.1007/s11187-024-00940-0
Rights: This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit
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