Why Should We Pay Attention to Working Capital Management? A Case of Ghana
Why Should We Pay Attention to Working Capital Management? A Case of Ghana
No Thumbnail Available
Date
2024-03-11
Authors
Baafi Antwi ,Joseph
Effah , Eric Sarkodie
Duodu, John Kwame
Kumah, Seyram Pearl
Journal Title
Journal ISSN
Volume Title
Publisher
MDPI
Abstract
The paper examines the nexus between working capital management (WCM) and financial
performance of listed non-financial firms in Ghana. An unbalanced panel data for the period 2008 to
2021 was used for the study. It is observed that the residual terms of the models were cross-sectionally
independent and all the series were first-differenced stationary and cointegrated in the long term The
elasticities of the predictors were explored via the Fully Modified Ordinary Least Squares (FMOLS)
and the Dynamic Ordinary Least Squares (DOLS) techniques. The findings of the study indicate that
WCM proxied by accounts receivable period (ACP), accounts payment period (APP), and inventory
turnover period (ITP) have significant positive effect on firms’ financial performance measured
by return on assets (ROA), return on equity (ROE), and return on capital employed (ROCE). This
suggests that the working capital management practices of non-financial firms in Ghana improve
their financial performance. Also, firm size and asset growth improve firm financial performance.
On the causalities between the variables, bidirectional causalities between ACP, APP, ITP, size, and
thecompanies’ ROA, ROE, and ROCE are disclosed. Finally, causality from growth to the ROA, ROE,
and ROCE of the firms are unraveled. It is recommended that policy makers of non-financial firms in
Ghana should not overlook WCM practices in their financial decisions, since ignoring them could
seriously compromise the firms’ short- and long-term sustainability
Description
Keywords
Citation
Baafi, J. A., Sarkodie, E. E., Duodu, J. K., & Kumah, S. P. (2024). Why Should We Pay Attention to Working Capital Management? A Case of Ghana. Businesses, 4(1), 78-95.