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Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Kaodui Li, Mohammed Musah, Yusheng Kong, Isaac Adjei Mensah, Stephen Kwadwo Antwi, Jonas Bawuah, Mary Donkor, Cephas Paa Kwasi Coffie and Agyemang Andrew Osei

SAGE Open, 2020, vol. 10, issue 3, 2158244020950363

Abstract: The aim of this research was to establish the nexus between liquidity and the viability of quoted non-financial establishments in Ghana. Panel data deduced from the published annual reports of 15 entities for the period 2008 to 2017 was employed for the study. Preliminarily, cross-sectional reliance, unit root, serial correlation, heteroscedasticity, co-integration, and causality tests were respectively performed. Our findings established that there exists no cross-sectional reliance, and input variables are stationary and co-integrated with no presence of heteroscedasticity and serial correlation. Estimates from the random effects generalized least squares (GLS) regression showed that liquidity has significant adverse effect on the firms’ Return on Equity (ROE) but had insignificantly positive effect on ROE when surrogated by the cash flow ratio. Finally, test based on causalities uncovered that, with the exception of Current Ratio and ROE that are flanked by bidirectional liaison, no other causal affiliation was evidenced amid other variables. Policy recommendations are further discussed.

Keywords: liquidity; financial performance; nexus; non-financial firms; Ghana Stock Exchange (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1177/2158244020950363

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