The effect of liquidity and financial leverage on firm performance: evidence from listed banks in ghana.
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Date
2023
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KNUST
Abstract
The banking sector has contributed more to the economy of the nation as compared to the manufacturing and other sectors in Ghana. The main aim of this study is to examine the effect of liquidity and financial leverage on firm performance of listed banks on the Ghana Stock Exchange (GSE) from 2016–2021. Nine (9) banks were analysed in this study. Regression analysis is being used in this study to determine the relationship between the variables being investigated. Specifically, this study adapted multiple linear regression analysis. The study finds that, debt to asset ratio, current ratio and quick ratio had a positive pearson correlation with return on asset and return on equity according to the correlation matrix. But debt to equity ratio had a negative pearson correlation with return on asset and return on equity. The regression coefficient shown that financial leverage (debt to asset) had a significant effect on the firm performance of the banks listed on the Ghana Stock Exchange (GSE). The study recommends that managers of the various banks listed on the Ghana Stock Exchange (GSE) should focus on debt to asset ratio as one of their solvency indicators ahead of debt to equity, current ratio and quick ratio. Also, further studies should also be carried out on the impact of financial leverage and liquidity on firms’ performance among the banking firms in other West African countries.
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 science accounting and finance