Working capital management and firm performance in Ghana

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Within the global corporate world, firms’ ability to maintain steady liquidity is a major indication of fiscal well-being and a sign of efficient management, more so in emerging economies characterized by irregular shocks from the macro economy. In keeping in line with the fiscal well-being and maintenance of efficiency, firms take on various systems and procedures. Working capital management as an approach provides a firm the ability to bring into harmony the amount of cash locked up in debtors and stocks with payments to creditors. In the last two decades, literatures within financial management have sought to investigate the relation between working capital management and performance. Within the context of Ghana, the moderating role of macroeconomic indicators on the relation between working capital management and performance has received less attention. The study sought to fill this gap in literature by extending the study to other developing countries – Ghana- as well as adding another macroeconomic variable (exchange rate). The objectives of the study were to; examine the relationship between cash conversion cycle and firm performance of listed firms; assess the relation evident in macroeconomic indicators and performance of listed firms in Ghana; as well as to investigate how macroeconomic indicators moderate the relation that cash conversion cycle has on performance. Panel Regression Method was used for the estimation. Purposive sampling was used to select 18 firms with data from 2009 to 2018. The study found out that CCC is positively correlated with ROA. The study also found significant effects of inflation, GDP and exchange rates on ROA. The study recommends that managers monitor closely the changes to economic conditions as the economic conditions such as GDP has significant effect on firm performance.
A thesis submitted to the department of accounting and finance, school of business, Kwame Nkrumah university of science and technology in partial fulfilment of the requirements for the award of the degree of Master of business administration in finance