Predictors of corporate financial performance: An empirical evidence from the Ghana stock exchange (GSE)
Mohammed Musah, Yusheng Kong, Stephen Kwadwo Antwi, Mary Donkor
This study sought to examine the predictors of the financial performance of non-financial firms listed on the Ghana Stock Exchange (GSE). A ten (10) year panel data sourced from the audited and published annual reports of fifteen (15) selected firms for the period 2008 to 2017 was used for the study. In the study, financial performance proxied by Return on Assets (ROA) served as the explained variable, whilst liquidity, capital structure, operational efficiency and firm size served as the explanatory variables. From the study’s RobustRandom-Effects GLS regression estimates, liquidity, operational efficiency and firm size were not significant predictors of the firms’ financial performance as measured by ROA. However, capital structure proxied by the debt ratio was a significant predictor of the firms’ financial performance. It was also uncovered that, liquidity, capital structure, operational efficiency and firm size were combined significant predictors of the firms’ financial performance [(Wald chi2 (4) =84338.06, (p=0.0000) <0.05]. Based on the findings, it was recommended that, non-financial firms listed on the Ghana Stock Exchange (GSE) could gain greater financial performance by efficiently using their size to gain economies of scale; by operating with a capital structure mix that minimizes costs and maximizes returns; by efficiently managing or using their assets to generate revenues (in other words, employing effective revenue diversification strategies as opposed to focused strategies); and by maintaining the right amount of liquid assets. Put simply, the financial performance of non-financial firms listed on the Ghana Stock Exchange (GSE) is largely driven by firm size, liquidity, capital structure and assets’ management. The careful planning and management of the above variables, is therefore an essential way of improving the final bottom line of the firms.