Quality of financial statements, information asymmetry, perceived risk and access to finance by Ugandan SMEs

Abstract

The eminence of investigating the relationship between quality of financial statements, information asymmetry, perceived risk and access to finance by Ugandan Small and Medium-sized Enterprises (SMEs) is well understood in the literature. This study is cross-sectional and correlational. Using Ordinary Least Squares (OLS) multiple regression, we determine the magnitude/strength of the relationship between the dependent and independent variables. Data are obtained from a questionnaire survey of a sample of 75 SMEs registered and operating in Kampala, Uganda. The results indicate that there is a significant positive relationship between quality of financial statements and access to finance, and a significant negative relationship between information asymmetry and access to finance. However, perceived risk is not significantly associated with access to finance. The interaction between quality of financial statements and perceived risk is negative, meaning that high-quality financial statements coupled with high perceived risk will result in low access to finance. Overall, our model explains 63.7% of the variation in access to finance.