Corporate liquidity and financial performance: A panel study of non-financial firms listed on the Ghana stock exchange (GSE)
Mohammed MUSAH, Yusheng KONG, Stephen Kwadwo Antwi
This study examined liquidity and the financial performance of non-financial firms listed on the Ghana Stock Exchange (GSE). Specifically, the study sought to establish the relationship between liquidity and the financial performance of the firms and to examine the effect of liquidity on the financial performance of the firms. Generally, this study was a quantitative research because, it provided the fundamental connection between empirical observation and mathematical expression of quantitative relationships. All the non-financial firms listed on the Ghana Stock Exchange (GSE) totaling twenty-eight (28) formed the target population of the study. However, a sample of fifteen (15) representing 53.57% of the population qualified to be used in the study. A ten (10) year panel data deduced from the audited and published annual reports of the selected firms was used for the study. The study adopted the descriptive and inferential techniques of data analyses using the STATA version 15 software package with a 5% level of significance (p<0.05). From the study’s Pearson Product-Moment Correlation Coefficient estimates, liquidity measured by the current ratio and the operating cash flow ratio had a significant relationship with the firms’ financial performance as measured by ROA. The study’s Robust Fixed-Effects GLS regression output also established that, liquidity measured by the current ratio and the operating cash flow ratio had an insignificant impact on the firms’ financial performance as measured by ROA. On the control variables, the study’s correlation results revealed that, size and growth had significantly positive relationship with ROA. A significantly inverse relationship was further found between efficiency and ROA, whilst tangibility of the firms had an insignificantly positive association with ROA. The study’s regression results on the control variables showed that, size of the listed firms negatively affected ROA but the effect was statistically insignificant. Also, growth had an insignificantly positive influence on ROA. Additionally, efficiency had a significantly inverse effect on the firms’ ROA whilst tangibility of the firms had a significantly positive effect on the firms’ ROA. Finally, current ratio, operating cash flow ratio, size, growth, efficiency and tangibility had a combined significant influence on the firms’ financial performance as measured by ROA. Based on the findings the study recommended that, liquidity management is an important component of financial management. Embracing it effectively, is therefore the best way to improve the firms’ financial performance.