Capital adequacy, cost to income ratio and performance of manufacturing firms in ghana

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Date
2023
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KNUST
Abstract
The study's main purpose is to investigate how capital adequacy ratio and cost to income ratio impact the financial outcome of manufacturing firms listed on the Ghana Stock Exchange (GSE) from 2017 to 2022. The study adapted multiple linear regression analysis. Capital adequacy ratio was measured with equity capital to asset (ECA) and debt to equity (DE). Purposive sampling technique was used to sample five of the listed manufacturing firms as some firms did not have all the financial statements needed for this study. The study finds that the trend of the average equity capital to asset (ECA) fell from 2018 to 2022. Then the trend of average debt to equity ratio experienced an increase and decrease during the years considered for this study. The trend for the average cost to income ratio (CIR) also experienced some increase and decrease from 2017 to 2022. According to the correlation matrix, return on asset (ROA) did have a positive correlation with equity capital to asset (ECA) but a negative correlation with debt to equity (DE) and cost to income ratio (CIR). Then return on equity (ROE) had a positive correlation with debt to equity (DE) but a negative correlation with equity capital to asset (ECA) and cost to income ratio (CIR). The regression matrix concludes that ECA is significant to return on equity. In the nutshell, capital adequacy ratio (CAR) is significant to the firm performance of manufacturing firms listed on the Ghana Stock Exchange. The study recommends that study should be done on analysing the effects of Capital Adequacy Ratio (CAR) and Cost to Income Ratio (CIR) on Firm Performance for mining and telecommunication companies on the Ghana Stock Exchange.
Description
A thesis submitted to the department of accounting and finance, college of humanities and social sciences in partial fulfilment of the requirements for the degree of master of business administration (finance)
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