article · International Journal of Industrial Management
This study investigates how working capital management influences the performance of listed firms in Ghana, representing an emerging economy. Analysing ten years of financial data from 2010 to 2019 across 36 publicly listed companies, the inquiry evaluates operational metrics alongside wider financial variables. The analysis reveals that higher days of inventory, accounts receivable, and leverage are negatively associated with firm performance. Conversely, longer accounts payable periods, higher sales growth, larger firm size, stronger current ratios, and greater fixed financial assets relate positively to performance. Additionally, the cash conversion cycle shows a quadratic, concave relationship with return on assets, indicating that cash cycle efficiency has an optimal point for supporting corporate returns.
Managing daily operational cash flows and inventory balances directly affects corporate viability. By establishing empirical links between working capital components and financial outcomes in Ghana, these findings help financial managers and corporate boards understand which cash flow levers, such as payment terms and stock levels, correlate with improved firm returns and market valuation in emerging markets.
The empirical findings can inform corporate financial planning, working capital policies, and treasury management strategies for finance executives and advisors operating in emerging markets. Because the study presents retrospective dynamic panel econometric analysis of historical market data, the evidence is descriptive and early stage, requiring internal adaptation by corporate practitioners rather than representing a direct commercial product.
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The aim/purpose of this scientific inquiry is to empirically examine the impact of working capital management (WCM) [cash conversion cycle (CCC), number of days inventory (INV), number of days account receivable (AR), number of days account payable (AP)] and control variables [sales growth (GROW), size (SIZE), leverage (LEV), current ratio (CR) fixed financial assets to total assets (FFA)] on firm performance (FP) [ROA, Tobin’s Q (TQ)] in the context of an emerging economy, Ghana. The research used a dynamic panel System of Generalized Method of Moment (GMM) to test the hypotheses. Utilizing financial data extracted from final accounts of 36 listed companies, spanning 2010-2019, the study examined WCM-performance-nexuses by following the methodologies of researchers/scholars in extant literature. Findings/Results indicates that, whilst INV, AR, LEV demonstrated negative/inverse/indirect associations with FP; AP, GROW, SIZE, CR, FFA depicted positive/direct associations with FP. CCC however, exhibited a quadratic concave relationship with ROA.
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DOI: 10.15282/ijim.12.1.2021.6994
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