Working capital management and financial performance of financial institutions listed on the ghana stock exchange
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Date
2023
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KNUST
Abstract
A company's stability and existence depend heavily on its working capital. When a bank fails, it automatically means that its working capital has failed as well. This failure might be quite infectious and result in a bank run on the struggling. This is one of the factors contributing to the performance of the banking industry being so highly dependent on effective working capital management. In particular, this study looks at the impact of working capital management (WCM) on the financial performance of financial institutions in Ghana from 2011 to 2020. The study tasted Six (6) out of the nine (9) listed financial institution in Ghana as at 31st December, 2020. The information was obtained from the banks' annual reports (GSE). The Pearson Correlation Analysis was used to find out the link between working capital management characteristics and firms' profitability. Furthermore, Ordinary Least Squares regression was performed to investigate how working capital management affects the profitability of financial firms listed on the Ghana Stock Exchange. Using two profit indicators; return on Asset and Return on Equity, the study found that, cash ratio and current ratio has a significant impact on the Return on Asset variable of the banks under study. Loan ratio however had no significant effect on return on assets. The findings of this study led to the conclusion that, WCM has some effects in determining the profitability of financial firms listed on the Ghana Stock Exchange. This was evidenced by cash ratio and current ratios are the variables that have significant effect on return of asset. To make this possible, bank management must guarantee that there is always enough liquidity to satisfy consumer demand.
Description
A thesis submitted to the department of accounting and finance, college of humanities and social sciences in partial fulfilment of the requirement for the award of degree of msc accounting and finance