Working capital management and financial performance of listed non-financial firms in ghana
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Date
2023
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KNUST
Abstract
The study examines the effect of working capital management on the financial performance of non-financial firms listed in Ghana. The research adopts a quantitative research methodology, specifically a causal research design guided by the positivist paradigm. The study utilizes secondary data from the financial statements and annual reports of 22 non-financial firms listed on the GSE between 2001 and 2021. The Generalized Method of Moments model was employed for data analysis, considering the interdependence of variables and potential endogeneity issues. The study reveals important relationships between working capital management and financial performance indicators. A longer collection period is associated with improved financial performance but a lower market value, while a longer payment period to suppliers is linked to higher profitability but a lower market value. Cash conversion efficiency has mixed relationships, with a positive but statistically insignificant correlation with financial performance and a negative correlation with market value. Additionally, a shorter cash conversion cycle is associated with higher profitability and market value (Tobin's q). Based on the findings, the study recommendations for non financial firms in Ghana include optimizing days sales outstanding, managing days payment outstanding strategically, enhancing cash conversion efficiency, shortening the cash conversion cycle, considering the trade-off between liquidity and financial performance, and establishing a system for continual monitoring and analysis.
Description
A thesis submitted to the institute of distance learning, Kwame Nkrumah university of science and technology in partial fulfilment of the requirement for the degree of master of science in accounting and finance