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The Impact of Working Capital Management on Corporate Performance: Evidence from Listed Non-Financial Firms in Ghana

Author

Listed:
  • Yakubu, Ibrahim Nandom
  • Alhassan, Mohammed Mubarik
  • Fuseini, Abdul-Aziz

Abstract

Working Capital Management (WCM) plays a significant role in the successful operation of businesses due to its significant effect on corporate profitability and liquidity. This study empirically examines the impact of working capital management on the performance of non-financial firms in Ghana. Using secondary data of five listed non-financial firms for the period 2010-2015, the Random effect model was employed to establish the relationship that exists between the various components of working capital management and firm performance and whether these WCM components impact significantly on firm performance. The results show that average payment period and current ratio have a positive relationship with firm performance. Average collection period, inventory turnover, cash conversion cycle, and firm size on the other hand have a negative relationship with firm performance. However, only average collection period, average payment period, cash conversion cycle, and current ratio are found to have a significant impact on firm performance. The study recommends that managers of non-financial firms in Ghana should formulate sound working capital management policies that will enable firms to deal with liquidity challenges and enhance their performance.

Suggested Citation

  • Yakubu, Ibrahim Nandom & Alhassan, Mohammed Mubarik & Fuseini, Abdul-Aziz, 2017. "The Impact of Working Capital Management on Corporate Performance: Evidence from Listed Non-Financial Firms in Ghana," MPRA Paper 95113, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95113
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    References listed on IDEAS

    as
    1. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, April.
    2. A.K. Sharma & Satish Kumar, 2011. "Effect of Working Capital Management on Firm Profitability," Global Business Review, International Management Institute, vol. 12(1), pages 159-173, February.
    3. Mohammad Talha & S. Benjamin Christopher & A.L. Kamalavalli, 2010. "Sensitivity of profitability to working capital management: a study of Indian corporate hospitals," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 2(3), pages 213-227.
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    Cited by:

    1. Abdulai, Shirazu Kuvidana & Umar, Siisu, 2022. "The Impact of Capital Adequacy and Bank Size on Profitability of Ghanaian Banks," MPRA Paper 122478, University Library of Munich, Germany, revised 2022.
    2. Samuel Tabot Enow, 2022. "A Meta-Analysis of the Impact of Working Capital on Profitability," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 10(1), pages 1-10.
    3. Yakubu, Ibrahim Nandom, 2019. "The Effect of Working Capital Management on Dividend Policy: An Empirical Analysis of Listed Firms in Ghana," MPRA Paper 95318, University Library of Munich, Germany.

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    More about this item

    Keywords

    Working Capital Management; Performance; Non-financial firms;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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