Financial Frictions and Firm Employment Dynamics: Empirical Evidence from African Listed Firms

This study examines how financial constraints affect firm-level employment growth among African listed firms over the period 1990–2025. Drawing on corporate finance and labour demand theories, it investigates whether financing frictions and debt maturity structure influence firms’ employment decisions in the context of shallow capital markets and limited long-term financing. Using an unbalanced panel of non-financial listed firms across African stock exchanges, the analysis employs fixed-effects and dynamic panel estimation techniques to account for firm heterogeneity and potential endogeneity.The results show that financial constraints significantly reduce employment growth, while reliance on short-term debt amplifies these adverse effects by increasing refinancing risk. The negative impact is particularly pronounced among smaller firms, reflecting greater information asymmetries, limited collateral, and restricted access to external finance. Robustness analyses using alternative measures of financial constraints, lagged specifications, and subsample estimations confirm the stability of the findings. The study contributes to the literature by providing new firm-level evidence from African capital markets and demonstrating that both financing constraints and debt maturity are important determinants of employment dynamics. The findings highlight the importance of policies that improve access to long-term finance and strengthen capital market development to support sustainable employment growth across African economies.Copyright© 2026 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.Article’s History: Received 3rd of April, 2026; Revised 9th of May, 2026; Accepted 7th of June, 2026; Available online: 30h of June, 2026. Published as research article in the Volume XXI, Summer, Issue 3(93), 2026.