Coleman, C E; Mwanaumo, E M; Muya, M and Rahman, R A (2025) Financial challenges leading to premature contract termination in Ghanaian construction industry: Causes and mitigation strategies. Journal of Construction Business and Management, 7(2), pp. 45-66.
Abstract
This study examines the link between financial challenges and premature construction contract termination in Ghana’s construction industry. The study is grounded in Keynesian economics, which offers insights into the broader economic impacts of these financial challenges, and cash flow management theories, which help analyze the financial viability and liquidity issues that exacerbate these risks. Additionally, financial risk management models are employed to assess the risks related to banking disputes and economic instability, providing a comprehensive framework for understanding the financial difficulties contributing to contract termination. Employing a quantitative research approach, Data from 315 industry professionals revealed three key dimensions of financial challenges: Financial Integrity Risks (FIR), Financial Mismanagement and Economic Instability Risks (FMEIR), and Financial Risk Due to Banking Disputes and Instability (FRBDI). Structural equation modelling confirmed the robustness of the proposed model, highlighting the strong correlations between these financial risks and contract termination. The findings emphasize the need for proactive risk management and comprehensive contractual strategies to prevent contract disputes and ensure project viability. For stakeholders in the construction industry, this study underscores the practical importance of implementing rigorous financial risk management strategies. By enhancing project planning, fostering stakeholder collaboration, and ensuring robust contractual arrangements, the industry can mitigate the adverse effects of financial instability and improve overall project outcomes.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | financial challenges; contract termination; Ghana |
| Index terms: | contract termination, banking, strategy, structural equation modelling, economic impact, mitigation, collaboration, project planning, cash flow management, quantitative research, liquidity, Ghana, project outcome, integrity, dispute, financial viability, risk management, construction contract, dimension, construction industry |
| Subjects: | financial risk, contract management, health safety and environment, Geography, financial analysis, project completion, contract type, economic analysis, business management, financial management, management, statistical analysis, industry analysis, dispute resolution, control systems, risk assessment, health monitoring assessment and metrics, data analysis and analytics |
| Topics: | Legal Issues, Geographical Context, Project Management, Health and Safety, Procurement, Risk Management, Contract Administration, Organizational Design, Research Practice, Cost Management, Business Strategy |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here