Determinants of Profitability of Listed Manufacturing Firms in Ghana

Determinants of Profitability of Listed Manufacturing Firms in Ghana

Abdul – Malik Abubakari

Due to the direct impact of manufacturing firms’ performance to economic stability, there is the need for special attention to examine factors that affect the manufacturing firms’ profitability (Akbas & Karadinan 2012). According to Opondo (2004), most studies has examined the determinants of profitability of firms considering variables such as capital structure, cash liquidity, firm size, and financial leverage in other countries but however, much has not been done in the Ghanaian context. This study assesses the determinant of financial performance of listed manufacturing firms in Ghana. The study used quantitative research approach and explanatory research design. Purposive sampling technique was used to select eight manufacturing companies out of the total population of thirteen listed manufacturing firms. The study used only secondary source of data (audited financial statements) for five year period, from 2011 to 2015. Also, correlation analysis was used to assess the collinearity between the dependent variables thus Return on Equity (ROE) and Return on Asset (ROA) and the independent variables such as financial leverage, cash liquidity, firm size, inflation and exchange rate, while the regression analysis indicates the effect of the independent variables on the dependent variables.
The result highlighted a negative significant relationship between financial leverage and ROE and ROA. Also, cash liquidity recorded established a positive insignificant relationship of ROE and ROA. Firm size establishes a positive significant relationship of ROE and ROA, inflation establish a significant negative relationship of ROE and ROA and also, exchange rate volatility establish a significant negative relationship of ROE and ROA.

MBA Finance

January 2018