Do Liquidity and Capital Structure Predict Firms’ Financial Sustainability? A Panel Data Analysis on Quoted Non-Financial Establishments in Ghana
Abstract
:1. Introduction
1.1. Financial Sustainability
1.2. Background of the Study
2. Literature Review
2.1. Liquidity and Firms’ Financial Sustainability Nexus
2.2. Capital Structure and Firms’ Financial Sustainability Nexus
2.3. Literature Gap
3. Materials and Methods
3.1. Data Source and Descriptive Statistics
3.2. Model Formulation
3.3. Analytical Procedure
4. Results and Discussions
4.1. Descriptive Analysis
4.2. Cross-Sectional Dependence Analysis
4.3. Unit Root and Cointegration Analysis
4.4. Results and Discussions
5. Conclusions and Policy Recommendations
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
- Zabolotnyy, S.; Wasilewski, M. The Concept of Financial Sustainability Measurement: A Case of Food Companies from Northern Europe. Sustainability 2019, 11, 5139. [Google Scholar] [CrossRef] [Green Version]
- Myšková, R.; Hájek, P. Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports. J. Int. Stud. 2017, 10, 96–108. [Google Scholar] [CrossRef] [Green Version]
- Koleda, N.; Oganisjana, K. Challenges in Learning for Company‘s Financial Viability Assessment and Management. Verslas Teor. Prakt. 2015, 16, 195–204. [Google Scholar] [CrossRef] [Green Version]
- Samiloglu, K.; Demirgunes, F. The effect of working capital management on firm profitability: Evidence from Turkey. Int. J. Appl. Econ. Financ. 2008, 2, 44–50. [Google Scholar] [CrossRef] [Green Version]
- Modigliani, F.; Pogue, G.A. An Introduction to Risk and Return: Concepts and Evidence, Part Two. Financ. Anal. J. 1974, 30, 69–86. [Google Scholar] [CrossRef]
- Amini, M.; Bienstock, C.C. Corporate sustainability: An integrative definition and framework to evaluate corporate practice and guide academic research. J. Clean. Prod. 2014, 76, 12–19. [Google Scholar] [CrossRef]
- Sardaro, R.; Bozzo, F.; Petrillo, F.; Fucilli, V. Measuring the financial sustainability of vine landraces for better conservation programmes of Mediterranean agro-biodiversity. Land Use Policy 2017, 68, 160–167. [Google Scholar] [CrossRef]
- Muscettola, F.; Naccarato, M. The Casual Relationship between Debt and Profitability: The Case of Italy. Athens J. Bus. Econ. 2015, 2, 17–32. [Google Scholar] [CrossRef]
- Singh, P.; Kumar, B. Trade-off Theory vs Pecking Order Theory Revisited. J. Emerg. Mark. Financ. 2012, 11, 145–159. [Google Scholar] [CrossRef]
- Asonuma, T.; Papaioannou, A.; Peraza, M.G.; Vitola, G.; Tsuda, K. Sovereign debt restructurings in Belize: Debt sustainability and financial stability aspects. J. Bank. Financ. Econ. 2017, 2, 5–26. [Google Scholar] [CrossRef]
- Palmer, E. Financial Sustainability of Swedish Welfare Commitments. Public Policy Rev. 2014, 10, 253–276. [Google Scholar]
- Fila, J. Microfinance institutions in Poland–towards preventing social and financial exclusion. Econ. Environ. Stud. 2018, 18, 531–549. [Google Scholar] [CrossRef]
- Santis, P.; Albuquerque, A.; Lizarelli, F. Do sustainable companies have a better financial performance? A study on Brazilian public companies. J. Clean. Prod. 2016, 133, 735–745. [Google Scholar] [CrossRef]
- Jansik, C.; Irz, X. Competitiveness of Dairy Farms In Northern Europe: A Cross-Country analysis. Agric. Food Sci. 2015, 24, 206–218. [Google Scholar] [CrossRef]
- Beaver, W.H. Financial Ratios As Predictors of Failure. J. Account. Res. 1966, 4, 71. [Google Scholar] [CrossRef]
- Ohlson, J.A. Financial Ratios and the Probabilistic Prediction of Bankruptcy. J. Account. Res. 1980, 18, 109. [Google Scholar] [CrossRef] [Green Version]
- Hosaka, T. Bankruptcy prediction using imaged financial ratios and convolutional neural networks. Expert Syst. Appl. 2019, 117, 287–299. [Google Scholar] [CrossRef]
- Altman, E.I. Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy. J. Financ. 1968, 23, 589. [Google Scholar] [CrossRef]
- Li, L.; Faff, R. Predicting corporate bankruptcy: What matters? Int. Rev. Econ. Financ. 2019, 62, 1–19. [Google Scholar] [CrossRef]
- Henock, S.M. Financial sustainability and outreach performance of saving and credit cooperatives: The case of Eastern Ethiopia. Asia Pac. Manag. Rev. 2019, 24, 1–9. [Google Scholar] [CrossRef]
- Schwab, L.; Gold, S.; Reiner, G. Exploring financial sustainability of SMEs during periods of production growth: A simulation study. Int. J. Prod. Econ. 2019, 212, 8–18. [Google Scholar] [CrossRef]
- Gryglewicz, S. A theory of corporate financial decisions with liquidity and solvency concerns. J. Financ. Econ. 2011, 99, 365–384. [Google Scholar] [CrossRef]
- Diakoulaki, L.; Mavrotas, D.; Papayannakis, G. A multicriteria approach for evaluating the performance of industrial firms. Omega 1994, 20, 467–474. [Google Scholar] [CrossRef]
- Ali, M.E.; Bilal, M. Determinants of Financial Performance in the Industrial Firms: Evidence from Jordan. Asian J. Agric. Ext. Econ. Sociol. 2018, 22, 1–10. [Google Scholar] [CrossRef]
- Swagatika, K.P.; Ajaya, N. The determinants of corporate profitability: An investigation of Indian manufacturing firms. Int. J. Emerg. Mark. 2018, 13, 66–86. [Google Scholar] [CrossRef]
- Mohd, P.; Asif, Y. Impact of liquidity, solvency and efficiency on profitability of steel authority of India limited. Int. J. Res. Manag. Econ. Commer. 2018, 6, 25–31. [Google Scholar]
- Musah, D.; Yusheng, M.; Stephen, K.; Mary, A.K. Predictors of corporate financial performance: An empirical evidence from the Ghana Stock Exchange (GSE). Int. J. Manag. Econ. 2019, 1, 27–42. Available online: www.managementjournals.netinition-393275 (accessed on 20 June 2022).
- Yusheng, K.A.; Musah, K.; Stephen, M. Liquidity-profitability trade-off: A panel study of listed non-financial firms in Ghana. Int. J. Trend Sci. Res. Dev. 2019, 3, 1086–1099. [Google Scholar]
- Kong, Y.; Musah, M.; Agyemang, A.O. Liquidity and financial performance: A correlational Analysis of Quoted Non-financial firms in Ghana. Int. J. Trend Sci. Res. Dev. 2019, 3, 133–143. [Google Scholar]
- Omesa, J.N. Effect of Liquidity on the Financial Performance of Financial Institutions Listed in the Nairobi Securities Exchange; University of Nairobi: Nairobi, Kenya, 2015. [Google Scholar]
- De Wet, S.J.; Gossel, L.H. South African capital structure decisions: A survey of listed companies. J. Afr. Bus. 2016, 17, 167–187. [Google Scholar] [CrossRef]
- Peavler, R. What is Capital Structure for Small Business? 2018. Available online: https://www.thebalancesmb.com/capital-structure-definition-393275 (accessed on 10 May 2022).
- Musah, K.; Yusheng, M. The association between capital structure and the financial performance of non-financial firms listed on the Ghana Stock Exchange (GSE). Int. J. Res. Soc. Sci. 2019, 9, 92–123. Available online: http://www.ijmra.us/social_journal.php (accessed on 6 April 2022).
- Uremadu, P.E.; Egbide, S.O.; Enyi, B.C. Working capital management, liquidity among quoted firms in Nigeria evidence from productive sector. Int. J. Acad. Res. Account. Financ. Manag. Sci. 2012, 2, 80–97. [Google Scholar]
- Chadha, A.K.; Sharma, S. Capital structure and firm performance: Empirical evidence from India. Vision 2015, 19, 295–302. [Google Scholar] [CrossRef]
- Hamidah, K.H.B.N.; Muhammad, R. The effect leverage, liquidity and profitability on the companies performance in Malaysia. J. Humanit. Lang. Cult. Bus. 2018, 2, 9–15. [Google Scholar]
- Majumder, M.T.H.; Uddin, M.J. The determinants of profitability of nationalised banks in Bangladesh. Int. J. Econ. Bus. Res. 2017, 13, 335–348. [Google Scholar] [CrossRef]
- Cudiamat, J.S.; Siy, A. Determinants of profitability in life insurance companies: Evidence from the Philippines. Essays Econ. Bus. Stud. 2017, 42, 165–175. [Google Scholar]
- Matin, K.A. Determinants of bank profitability in Bangladesh. Bangladesh J. Pol. Econ. 2019, 35, 389–412. [Google Scholar]
- Kanwal, M.; Shahzad, S.J.H.; ur Rehman, M.; Zakaria, M. Impact of capital structure on performance of non-financial listed companies in Pakistan. Pak. Bus. Rev. 2017, 19, 339–353. [Google Scholar]
- Vuong, N.B.; Vu, T.T.Q.; Mitra, P. Impact of Capital Structure on Firm’s Financial Performance: Evidence from United Kingdom. J. Financ. Econ. Res. 2017, 2, 18–31. [Google Scholar] [CrossRef] [Green Version]
- Ahmad, M.O.G. The Effect of Capital Structure on the Financial Performance of Listed Companies in Bahrain Bourse. J. Financ. Account. 2015, 3, 50–60. [Google Scholar] [CrossRef] [Green Version]
- Ayad, H.M.A.; Mustafa, S.S. The effect of capital structure on profitability. An empirical analysis of listed firms in Iraq. Eur. J. Account. Audit. Financ. Res. 2015, 3, 61–78. [Google Scholar]
- Goodman, T. Do You Know? 90 Percent of Businesses Established in Ghana Yearly collapses? See Reasons Why Businesses Fail in Ghana. 2021. Available online: https://www.talkfinance24.com/do-you-know-90-percent-of-businesses-established-in-ghana-yearly-collapses-see-reasons-why-businesses-fail-in-ghana/ (accessed on 18 March 2022).
- Pesaran, M.H. Testing Weak Cross-Sectional Dependence in Large Panels. Econom. Rev. 2015, 34, 2015. [Google Scholar] [CrossRef]
- Batchimeg, B. Financial Performance Determinants of Organizations: The Case of Mongolian Companies. J. Compet. 2017, 9, 22–33. [Google Scholar] [CrossRef] [Green Version]
- Nyamiobo, O.; Willy, J.K.; Walter, M.; Tobias, B.O. Effect of firm characteristics on financial performance of listed firms in Nairobi securities exchange. Int. J. Bus. Law Res. 2018, 6, 22–37. [Google Scholar]
- Navleen, K.; Jasmindeep, K. Determinants of profitability of automobile industry in India. J. Commer. Account. Res. 2016, 5, 32–39. [Google Scholar]
- Saripalle, M. Determinants of profitability in the Indian logistics industry. Int. J. Logist. Econ. Glob. 2018, 7, 13–27. [Google Scholar]
- Işik, C.; Kasımatı, E.; Ongan, S. Analyzing the causalities between economic growth, financial development, international trade, tourism expenditure and/on the CO2 emissions in Greece. Energy Sources Part B Econ. Plan. Policy 2017, 12, 665–673. [Google Scholar] [CrossRef]
- Pervan, M.; Pervan, I.; Ćurak, M. The Influence of Age on Firm Performance: Evidence from the Croatian Food Industry. J. East. Eur. Res. Bus. Econ. 2017, 2017, 618681. [Google Scholar] [CrossRef] [Green Version]
- Matar, M.; Al-Rdaydeh, A.; Al-Shannag, M.; Odeh, F. Factors affecting the corporate performance: Panel data analysis for listed firms in Jordan. Acad. Account. Financ. Stud. J. 2018, 22, 1–10. [Google Scholar]
- Raykov, E. The liquidity-profitability trade-off in Bulgaria in terms of the changed financial management functions during crisis. J. Contemp. Manag. Issues 2017, 22, 135–156. [Google Scholar] [CrossRef] [Green Version]
- Akenga, G. Effect of liquidity on financial performance of firms listed at the Nairobi Securities Exchange, Kenya. Int. J. Sci. Res. 2017, 7, 279–285. [Google Scholar]
- Kimondo, M.; Irungu, C.N.; Obanda, M. The impact of liquidity on the financial performance of the nonfinancial firms quoted on the Nairobi Securities ExchangeThe impact of liquidity on the financial performance of the nonfinancial firms quoted on the Nairobi Securities Exchange. Res. J. Account. 2016, 4, 1–12. [Google Scholar]
- Nazish, A.; Shehla, B. The relationship between liquidity and firms’ profitability: A case study of Karachi Stock Exchange. Asian J. Financ. Account. 2017, 9, 54–68. [Google Scholar]
- Kung’u, N.J. Effect of liquidity management practices on profitability of manufacturing industry in Kenya. (IOSR-JEF). IOSR J. Econ. Financ. 2017, 8, 84–89. [Google Scholar] [CrossRef]
- Ashutosh, R.; Gurpreet, G. Financial performance of sugar mills in Punjab: A. comparative study. Indian J. Account. (IJA) 2018, 50, 87–96. [Google Scholar]
- Mwashi, J.; Miroga, P.T. Influence of liquidity management practices on profitability of deposit taking SACCOS in Kakamega County. Strateg. J. Bus. Chang. Manag. 2018, 5, 902–922. [Google Scholar]
- Pratheepan, T. A panel data analysis of profitability determinants: Empirical results from Sri Lankan manufacturing companies. Int. J. Econ. Commer. Manag. 2014, 2, 1–9. [Google Scholar]
- Schulz, T. The impact of capital structure on firm performance: An investigation of Dutch Unlisted SMEs. Bachelor’s Thesis, University of Twente, Enschede, The Netherlands, 2017. Available online: https://purl.utwente.nl/essays/72690 (accessed on 1 February 2022).
- Onwumere, J.A.; Mmesirionye, J. Impact of liquidity management on the performance of agribusiness sector in Nigeria (1978–2013). Int. J. Bus. Manag. Rev. 2015, 3, 1–9. [Google Scholar]
- Apan, M.; İslamoğlu, M. Determining the impact of financial characteristics on firm profitability: An empirical analysis on Borsa Istanbul Energy Firms. WSEAS Trans. Bus. Econ. 2018, 15, 547–559. [Google Scholar]
- Mutwiri, A.K. The Effect of Capital Structure Decisions on Financial Performance of Firms Listed Under Energy and Petroleum Sector at the Nairobi Securities Exchange; University of Nairobi: Nairobi, Kenya, 2015. [Google Scholar]
- Kanga, G.; Achoki, O.S. Liquidity and financial performance in agricultural firms listed in the Nairobi Securities Exchange in Kenya. Int. J. Bus. Soc. Sci. 2017, 7, 57–65. [Google Scholar]
- EJike, N.C.; Agha, S.I. Impact of operating liquidity on profitability of pharmaceutical firms in Nigeria. Int. J. Acad. Res. Account. Financ. Manag. Sci. 2018, 8, 73–82. [Google Scholar] [CrossRef] [PubMed]
- Mulyana, A.; Zuraida, M.S. The Influence of Liquidity, Profitability and Leverage on Profit Management and Its Impact on Company Value in Manufacturing Company Listed on Indonesia Stock Exchange Year 2011–2015. Int. J. Manag. Stud. Res. 2018, 6, 8–14. [Google Scholar] [CrossRef]
- Jepkemoi, E. Determinants of Bank’s Profitability in Kenya; University of Nairobi: Nairobi, Kenya, 2017. [Google Scholar]
- Bassey, N.E.; Ukpe, O.U.; Solomon, U.U. The effect of capital structure choice on the performance of corporate organizations: A case of quoted agro-based firms in Nigeria. Bull. Bus. Econ. 2017, 6, 58–67. [Google Scholar]
- Akeem, A.M.; Terer, L.B.; Kiyanjui, E.K.; Kayode, M.W. Effect of capital structure on firm’s performance: Empirical study of manufacturing companies in Nigeria. J. Financ. Investig. Anal. 2014, 3, 39–57. [Google Scholar]
- Jalloh, M.A. Impact of capital adequacy on the performance of Nigerian Banks using the basel accord framework. East Afr. Res. Pap. Bus. Entrep. Manag. 2017, 7, 1–15. [Google Scholar]
- Wabwile, M.; Chitiavi, E.C.; Alala, M.C.; Douglas, B.C. Financial leverage and performance variance among banks. Evidence of Tier 1 commercial banks listed on Nairobi Security Exchange Kenya. Int. J. Bus. Manag. Invent. 2014, 3, 1–13. [Google Scholar]
- Abolfazl, T.; Mahdi, G.M.; Mohammadmahdi, S.K.; Mohammadreza, T.; Mahdi, A.; Mina, E. The impact of capital structure on corporate performance. Int. J. Acad. Res. Bus. Soc. Sci. 2015, 5, 148–162. [Google Scholar]
- Brien, A.; Parthiban, J.; Yoshikawa, D.; Delios, T. How capital structure influences diversification performance: A transaction cost perspective. Strateg. Manag. J. 2013, 34, 138–152. [Google Scholar] [CrossRef]
- Enekwe, K.N.; Agu, C.I.; Eziedo, C.I. The effect of financial leverage on financial performance: Evidence of quoted pharmaceutical companies in Nigeria. IOSR J. Econ. Financ. 2014, 5, 17–25. [Google Scholar]
- Rehman, S.S.F.U. Relationship between financial leverage and financial performance: Empirical evidence of listed sugar companies of Pakistan. Glob. J. Manag. Bus. Res. Financ. 2013, 13, 33–40. [Google Scholar]
- Sivathaasan, V.; Tharanika, N.; Sinthuja, R.; Hanith, M. Factors determining profitability: A study of selected manufacturing companies listed on the Colombo stock exchange in Sri Lanka. Eur. J. Bus. Manag. 2013, 5, 99–107. [Google Scholar]
- Ibhaguia, V.O.; Olokoyob, O.F. Leverage and firm performance: New evidence on the role of firm size. N. Am. J. Econ. Financ. 2018, 45, 57–82. [Google Scholar] [CrossRef]
- Mumtaz, U.; Rauf, R.; Ahmed, S.A.; Noreen, B. Capital Structure and Financial Performance: Evidence from Pakistan (Kse 100 Index). J. Basic Appl. Sci. Res. 2013, 3, 113–119. [Google Scholar]
- Pachori, K.; Totala, S. Influence of financial leverage on shareholders return and market capitalization: A study of automotive cluster companies of Pithampur (M.P) India. In Proceedings of the 2nd International Conference on Humanities, Geography and Economics (ICHGE'2012), Singapore, 28–29 April 2012; pp. 23–26. [Google Scholar]
- Babalola, S.J.; Umaru, A. Fiscal Policy and Economic Growth Relationship in Nigeria. Int. J. Bus. Soc. Sci. 2011, 2, 2011. Available online: https://ijbssnet.com/journals/Vol_2_No_17/33.pdf (accessed on 12 June 2022).
- Bhutta, A.; Hasan, N.T. Impact of Firm Specific Factors on Profitability of Firms in Food Sector. Open J. Account. 2013, 2, 19–25. [Google Scholar] [CrossRef]
- Njeri, M.M.K.; Kagiri, A.W. Effect of capital structure on financial performance of banking institutions listed in Nairobi securities exchange. Int. J. Sci. Res. 2013, 4, 924–930. [Google Scholar]
- Sathyamoorthi, C.R.; Pritika, S.B.; Dzimiri, M.; Wally-Dima, L. Capital structure and its effect on firm performance: An empirical study on the listed consumer services sector organizations in Botswana. Eur. J. Econ. Financ. Res. 2019, 3, 68–90. Available online: https://oapub.org/soc/index.php/EJEFR/article/view/648 (accessed on 5 May 2022).
- Chandra, C.S.; Udhayakumar, K.S. Impact of capital structure on firm performance: Evidence from India. Int. J. Pure Appl. Math. 2018, 118, 955–959. [Google Scholar]
- Saputra, L.; Achsani, T.; Anggraeni, N.A. The effect of capital structure on firm Performance: Empirical evidence from the Indonesian financial industry. Int. J. Bus. Manag. Invent. 2015, 4, 57–66. [Google Scholar]
- Rouf, D. Capital structure and firm performance of listed non-financial companies in Bangladesh. Int. J. Appl. Econ. Financ. 2015, 9, 25–32. [Google Scholar]
- Saifadin, R. The Impact of Capital Structure on Firm Performance: Evidence from Iraq; Bahcesehir University: Istanbul, Turkey, 2015. [Google Scholar]
- Nassar, S. The impact of capital structure on Financial Performance of the firms: Evidence from Borsa Istanbul. J. Bus. Financ. Aff. 2016, 5, 1–4. [Google Scholar]
- Le, T.B.N.; Phan, T.P.V. Capital structure and firm performance: Empirical evidence from a small transition country. Res. Int. Bus. Financ. 2017, 42, 710–726. [Google Scholar] [CrossRef]
- Ahmed, T.; Afza, N. Capital structure, competitive intensity and firm performance: Evidence from Pakistan. J. Adv. Manag. Res. 2019, 16, 796–813. [Google Scholar] [CrossRef]
- Kareem, J. Effect of Capital Structure on the Performance of Quoted Manufacturing Firms in Sub-Saharan Africa; Kwara State University: Kwara, Nigeria, 2019. [Google Scholar]
- Javed, M.; Younas, T.; Imran, W. Impact of capital structure on firm performance: Evidence from Pakistani firms. Int. J. Acad. Res. Econ. Manag. Sci. 2014, 3, 28–52. [Google Scholar] [CrossRef] [Green Version]
- Twairesh, A.E.M. The Impact of Capital Structure on Firm’s Performance: Evidence from Saudi Arabia. J. Appl. Financ. Bank. 2014, 4, 183–193. [Google Scholar]
- Ogenche, J.; Githui, R.M.; Omurwa, T. Effect of capital structure on financial performance of consumer goods firms listed in the Nairobi Securities Exchange. J. Financ. Acc. 2018, 2, 57–74. [Google Scholar]
- Abdullah, T.; Tursoy, H. Capital structure and firm performance: Evidence of Germany under IFRS adoptio. Rev. Manag. Sci. 2019, 15, 379–398. [Google Scholar] [CrossRef]
- Arellano, S.; Bond, M. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev. Econ. Stud. 1991, 58, 277. [Google Scholar] [CrossRef] [Green Version]
- Orshi, T.S. Impact of Liquidity Management on the Financial Performance of Listed Food and Beverages Companies in Nigeria; Federal University Dutsin-Ma: Katsina, Nigeria, 2016. [Google Scholar]
- Musah, K.; Yusheng, M. Leverage and financial performance: The correlational approach. Int. J. Innov. Res. Multidiscip. Field 2019, 5, 18. Available online: https://www.ijirmf.com (accessed on 4 June 2022).
- Ropafadzi, H. The Impact of Capital Structure on Company Profitability of Industrial Companies Listed on the Johannesburg Stock Exchange; University of Pretoria: Pretoria, South Africa, 2017. [Google Scholar]
- Shehryar, K. The Impact of Capital Structure on the Financial Performance of Firms: Evidence From Italy; Universita Ca’foscari Venezia: Venice, Italy, 2017. [Google Scholar]
- Frank, V.K.; Goyal, M.Z. Testing the pecking order theory of capital structure. J. Financ. Econ. 2018, 67, 217–248. [Google Scholar] [CrossRef] [Green Version]
- Musah, A.O.; Yusheng, M.; Agyemang, K. The nexus between asset tangibility and firms’ financial performance: A panel study of non-financial firms listed on the Ghana Stock Exchange (GSE). Eur. Acad. Res. 2019, 7, 450–474. [Google Scholar]
- Pesaran, M.H. General Diagnostic Tests for Cross Section Dependence in Panels; IZA: Bonn, Germany, 2004. [Google Scholar] [CrossRef]
- Mensah, I.A.; Sun, M.; Gao, C.; Omari-Sasu, A.Y.; Zhu, D.; Ampimah, B.C.; Quarcoo, A. Analysis on the nexus of economic growth, fossil fuel energy consumption, CO2 emissions and oil price in Africa based on a PMG panel ARDL approach. J. Clean. Prod. 2019, 228, 161–174. [Google Scholar] [CrossRef]
- Engle, C.W.J.; Granger, R.F. Co-integration and error correction: Representation, estimation and testing. Econometrica 1987, 55, 251–276. [Google Scholar] [CrossRef]
- Sun, Y.; Li, H.; Andlib, Z.; Genie, M.G. How do renewable energy and urbanization cause carbon emissions? Evidence from advanced panel estimation techniques. Renew. Energy 2022, 185, 996–1005. [Google Scholar] [CrossRef]
- Musah, M. Stock market development and environmental quality in EU member countries: A dynamic heterogeneous approach. Environ. Dev. Sustain. 2022. [Google Scholar] [CrossRef]
- Donkor, M.; Kong, Y.; Manu, E.K.; Ntarmah, A.H.; Appiah-Twum, F. Economic Growth and Environmental Quality: Analysis of Government Expenditure and the Causal Effect. Int. J. Environ. Res. Public Health 2022, 19, 10629. [Google Scholar] [CrossRef]
- Chen, H.; Tackie, E.A.; Ahakwa, I.; Musah, M.; Salakpi, A.; Alfred, M.; Atingabili, S. Does energy consumption, economic growth, urbanization, and population growth influence carbon emissions in the BRICS? Evidence from panel models robust to cross-sectional dependence and slope heterogeneity. Environ. Sci. Pollut. Res. 2022, 29, 37598–37616. [Google Scholar] [CrossRef]
- Yousaf, U.S.; Ali, F.; Aziz, B.; Sarwar, S. What causes environmental degradation in Pakistan? Embossing the role of fossil fuel energy consumption in the view of ecological footprint. Environ. Sci. Pollut. Res. 2022, 29, 33106–33116. [Google Scholar] [CrossRef]
- Samour, U.K.; Pata, A. The impact of the US interest rate and oil prices on renewable energy in Turkey: A bootstrap ARDL approach. Environ. Sci. Pollut. Res. 2022, 29, 50352–50361. [Google Scholar] [CrossRef]
- Li, K.; Hu, E.; Xu, C.; Musah, M.; Kong, Y.; Mensah, I.A.; Su, Y. A heterogeneous analysis of the nexus between energy consumption, economic growth and carbon emissions: Evidence from the Group of Twenty (G20) countries. Energy Explor. Exploit. 2021, 39, 815–837. [Google Scholar] [CrossRef]
- Ali, A.; Tursoy, M.; Samour, T.; Moyo, A.; Konneh, D. Testing the impact of the gold price, oil price, and renewable energy on carbon emissions in South Africa: Novel evidence from bootstrap ARDL and NARDL approaches. Resour. Policy 2022, 76, 102984. [Google Scholar] [CrossRef]
- Musah, M.; Kong, Y.; Mensah, A.I.; Antwi, S.K.; Donkor, M. The connection between urbanization and carbon emissions: A panel evidence from West Africa. Environ. Dev. Sustain. 2021, 23, 11525–11552. [Google Scholar] [CrossRef]
- Musah, M.; Kong, Y.; Vo, X.V. Predictors of carbon emissions: An empirical evidence from NAFTA countries. Environ. Sci. Pollut. Res. 2020, 28, 11205–11223. [Google Scholar] [CrossRef]
- Phale, K.; Li, F.; Adjei Mensah, I.; Omari-Sasu, A.Y.; Musah, M. Knowledge-Based Economy Capacity Building for Developing Countries: A Panel Analysis in Southern African Development Community. Sustainability 2021, 13, 2890. [Google Scholar] [CrossRef]
- Amin, A.; Zhou, M.; Safi, S. The nexus between consumption-based carbon emissions, trade, eco-innovation, and energy productivity: Empirical evidence from N-11 economies. Environ. Sci. Pollut. Res. 2022, 29, 39239–39248. [Google Scholar] [CrossRef]
- Isik, U.F.; Tasgin, O. Profitability and its determinants in Turkish manufacturing industry: Evidence from a dynamic panel model. Int. J. Econ. Financ. 2017, 9, 66–75. [Google Scholar] [CrossRef] [Green Version]
- Trujillo-Ponce, A. What determines the profitability of banks? Evidence from Spain. Account. Financ. 2013, 53, 561–586. [Google Scholar] [CrossRef]
- Lazăr, S. Determinants of firm performance: Evidence from Romanian listed companies. Rev. Econ. Bus. Stud. 2016, 9, 53–69. [Google Scholar] [CrossRef] [Green Version]
- Gichuhi, L. The Effect of Capital Structure on Profitability of Firms Listed at the Nairobi Securities Exchange. Ph.D. Thesis, University of Nairobi, Nairobi, Kenya, 2016. [Google Scholar]
- Alemu, S. Determinants of Commercial Banks Profitability: The Case of Ethiopian Commercial Banks. Unpublished MBA Thesis, Addis Ababa University, Addis Ababa, Ethiopia, 2015. [Google Scholar]
- Demis, H. Macroeconomic and firm specific determinants of profitability of insurance industry in Ethiopia. Glob. J. Manag. Bus. Res. C Financ. 2016, 16, 27–36. [Google Scholar]
- Rajan, L.; Zingales, R.G. What do we know about capital structure? Some evidence from international data. J. Financ. 1995, 50, 1421–1460. [Google Scholar] [CrossRef]
- Osadune, S.; Ibenta, R. Evaluation of the financial performance of deposit money banks in Nigeria (2001–2014). IIARD Int. J. Bank. Financ. Res. 2018, 4, 23–50. [Google Scholar]
- Maina, S.N. The Relationship between Liquidity and the Profitability of Commercial Banks in Kenya; University of Nairobi: Nairobi, Kenya, 2017. [Google Scholar]
- Jawed, K.K.; Kotha, M.S. Stock liquidity and firm value: Evidence from a policy experiment in India. Int. Rev. Financ. 2018, 20, 215–224. [Google Scholar] [CrossRef]
- Anowar, Z. Capital structure and profitability of Bangladeshi firms: A causal investigation. Univ. J. Account. Financ. 2016, 4, 130–135. [Google Scholar] [CrossRef] [Green Version]
- Olarewaju, O.K.; Adeyemi, O.M. Causal relationship between liquidity and the profitability of Nigerian deposit money banks. Int. J. Acad. Res. Account. Financ. Manag. Sci. 2015, 5, 165–171. [Google Scholar] [CrossRef]
- Demirgunes, K. The effect of liquidity on financial performance: Evidence from Turkish Retail Industry. Int. J. Econ. Financ. 2016, 8, 63–79. [Google Scholar] [CrossRef]
- Agiomirgianakis, G.; Magoutas, G.M.; Sfakianakis, A.I. Determinants of profitability in the Greek tourism sector revisited: The impact of the economic crisis. J. Tour. Hosp. Manag. 2013, 1, 12–17. [Google Scholar]
- Muthusi, P. Effects of Free Cash Flows on the Profitability of Five Star Hotels in Kenya; University of Nairobi: Kenya, Nairobi, 2014. [Google Scholar]
- Ajayi, B.G.; Zahiruddin, O.D. The impact of capital structure on firm performance: Empirical evidence from Nigeria. IOSR J. Econ. Financ. 2016, 7, 23–30. [Google Scholar]
- Cuong, T.N.N.; Quan, D.P.; Lan, X.T. Effects of internal factors on financial performance of listed construction-material companies: The case of Vietnam. Res. J. Financ. Account. 2018, 9, 1–7. [Google Scholar]
- Islamoglu, M.; Çelik, N. Financial performance determinants of paper and paper products firms listed in Borsa Istanbul International. J. Econ. Financ. 2015, 7, 233–244. [Google Scholar]
- Birhan, M. Determinants of insurance company profitability in Ethiopia (case study on Nile Insurance, Dire Dawa Branch). Int. J. Sci. Res. Publ. 2017, 7, 761–767. [Google Scholar]
Variable | Measurement | Proxy |
---|---|---|
Return on equity (ROE) | Net Income/Total Equity | Financial Sustainability |
Current Ratio (CR) | Total Current Assets/Total Current Liabilities | Liquidity |
Debt Ratio (DR) | Total Liabilities /Total Assets | Capital Structure |
Firm Size (SIZE) | Log of Total Assets | Control Variable |
Assets Growth (GRO) | (Sizet− Sizet−1)/Sizet-1 | Control Variable |
Operational Efficiency (EFF) | Gross Revenue/Total Assets | Control Variable |
Assets Tangibility (TAN) | Tangible Assets/Total Assets | Control Variable |
Variable | Mean | Maximum | Minimum | Std. Dev. | Skewness | Kurtosis |
---|---|---|---|---|---|---|
ROE | 0.002 | 0.095 | −0.072 | 4.410 | 18.248 | 334.003 |
CR | 3.490 | 7.610 | 0.036 | 4.7100 | 14.355 | 216.809 |
DR | 22.921 | 42.00 | 2.805 | 327.085 | 17.239 | 306.683 |
CR*DR | 2.542 | 16.411 | 1.767 | 8.042 | 7.113 | 14.448 |
SIZE | 4.780 | 8.734 | 0.662 | 1.465 | 0.427 | 3.356 |
GRO | 0.036 | 0.977 | −0.671 | 0.132 | 2.012 | 20.441 |
EFF | 1.234 | 7.924 | 0.034 | 1.157 | 2.289 | 8.597 |
TAN | 0.770 | 0.915 | 0.009 | 0.360 | 4.721 | 64.446 |
Variable | Multi-Collinearity Test | Normality Test | ||
---|---|---|---|---|
VIF | Tolerance | Jarque–Bera | Prob. | |
ROE | - | - | 1,552,530.0 | 0.000 *** |
CR | 1.09 | 0.917 | 651,536.9 | 0.000 *** |
DR | 1.01 | 0.990 | 1,307,766.0 | 0.000 *** |
CR*DE | 1.05 | 0.953 | 275,401.5 | 0.000 *** |
SIZE | 1.03 | 0.971 | 11.971 | 0.000 *** |
GRO | 1.02 | 0.981 | 4485.324 | 0.000 *** |
EFF | 1.08 | 0.926 | 731.8045 | 0.000 *** |
TAN | 1.07 | 0.935 | 54,107.49 | 0.000 *** |
Test Type | Value | Prob. |
---|---|---|
Breusch–Pagan LM | 386.514 | 0.127 |
Pesaran scaled LM | 7.895 | 0.852 |
Pesaran CD | 3.551 | 0.414 |
Variable | Levels | First Difference | ||||||
---|---|---|---|---|---|---|---|---|
LLC | IPS | ADF | PP | LLC | IPS | ADF | PP | |
ROE | −1.5062 | −2.8832 | 97.2932 | 185.855 | −9.0665 | −7.6778 | 173.3710 | 395.8220 |
0.466 | 0.112 | 0.621 | 0.202 | 0.000 *** | 0.000 *** | 0.000 *** | 0.000 *** | |
CR | 1.600 | 0.9635 | 54.3471 | 80.4382 | 2.3000 | −3.6829 | 108.602 | 254.807 |
1.000 | 0.832 | 0.538 | 0.318 | 0.050 * | 0.001 *** | 0.021 ** | 0.000 *** | |
DR | 2.1094 | 1.9962 | 45.5713 | 73.1354 | −8.5945 | −4.3858 | 132.625 | 251.924 |
0.983 | 0.977 | 0.839 | 0.162 | 0.000 *** | 0.000 *** | 0.000 *** | 0.000 *** | |
CR*DR | −4.676 | −1.154 | 54.323 | 65.522 | −8.195 | −5.157 | 121.191 | 258.297 |
0.410 | 0.529 | 0.511 | 0.218 | 0.000 *** | 0.000 *** | 0.000 *** | 0.000 *** | |
SIZE | 2.8079 | 2.6598 | 40.3645 | 82.6187 | 2.5198 | 0.5255 | 66.3852 | 266.498 |
0.998 | 0.996 | 0.943 | 0.111 | 0.094 * | 0.000 *** | 0.061 * | 0.000 *** | |
GRO | −0.4119 | −3.1311 | 89.5319 | 198.388 | −4.4781 | −5.9411 | 140.601 | 421.361 |
0.340 | 0.601 | 0.212 | 0.422 | 0.000 *** | 0.000 *** | 0.000 *** | 0.000 *** | |
EFF | −1.7219 | −1.4548 | 75.1238 | 77.2389 | −6.9768 | −4.6933 | 124.462 | 240.201 |
0.143 | 0.733 | 0.245 | 0.352 | 0.000 *** | 0.000 *** | 0.000 *** | 0.000 *** | |
TAN | −4.9424 | −3.7346 | 99.9197 | 125.147 | −6.9768 | −4.6933 | 124.462 | 240.201 |
0.222 | 0.431 | 0.441 | 0.914 | 0.000 *** | 0.000 *** | 0.000 *** | 0.000 *** |
Hypothesized | Fisher Stat. | Prob. | Fisher Stat. | Prob. |
---|---|---|---|---|
No. of CE(s) | (From Trace Test) | (From Max-Eigen Test) | ||
None | 547.4 | 0.000 *** | 165.7 | 0.000 *** |
At most 1 | 304.5 | 0.000 *** | 229.3 | 0.000 *** |
At most 2 | 348.2 | 0.000 *** | 176.6 | 0.000 *** |
At most 3 | 222.5 | 0.000 *** | 115.6 | 0.000 *** |
At most 4 | 153.1 | 0.000 *** | 93.73 | 0.000 *** |
At most 5 | 112.2 | 0.000 *** | 69.49 | 0.013 ** |
At most 6 | 78.29 | 0.000 *** | 72.36 | 0.000 *** |
At most 7 | 34.08 | 0.045 ** | 31.08 | 0.034 ** |
Test Type | t-Statistic | Prob. |
---|---|---|
ADF | −6.514 | 0.000 *** |
Residual variance | 0.0452 | |
HAC variance | 0.0448 |
Variable | Coefficient | Z | Prob. |
---|---|---|---|
ROEt-1 | −0.523 | 3.31 | 0.002 ** |
CR | 0.937 | 4.12 | 0.000 *** |
DR | 0.841 | 3.55 | 0.004 *** |
CR*DR | 0.504 | 3.16 | 0.005 *** |
SIZE | 1.496 | 4.41 | 0.000 *** |
GRO | 0.647 | 2.14 | 0.024 ** |
EFF | 0.894 | 3.85 | 0.001 *** |
TAN | −0.047 | −1.14 | 0.712 |
Sargan test | 38.82(0.613) | ||
AR [2] test | −0.43(0.422) |
Variable | Coefficient | Z | Prob. |
---|---|---|---|
ROEt-1 | −0.464 | 2.86 | 0.051 * |
CR | 0.822 | 3.82 | 0.003 *** |
DR | 0.748 | 3.14 | 0.008 *** |
CR*DR | 0.341 | 2.45 | 0.034 ** |
SIZE | 1.828 | 4.55 | 0.000 *** |
GRO | 0.517 | 3.06 | 0.007 *** |
EFF | 0.453 | 2.81 | 0.035 ** |
TAN | −0.022 | −1.02 | 0.757 |
Sargan test | 34.17 (0.761) | ||
AR [2] test | −0.29 (0.321) |
Null Hypothesis: | F-Statistic | Prob. |
---|---|---|
ROEt−1→ROE | −4.421 | 0.047 ** |
ROE→ROEt−1 | 0.568 | 0.832 |
CR→ROE | 8.006 | 0.000 *** |
ROE→CR | 6.003 | 0.000 *** |
DR→ROE | 8.004 | 0.000 *** |
ROE→DR | 5.404 | 0.014 ** |
CR*DR→ROE | 6.023 | 0.000 *** |
ROE→CR*DR | 0.011 | 0.527 |
SIZE→ROE | 4.136 | 0.087 * |
ROE→SIZE | 0.988 | 0.246 |
GRO→ROE | 6.059 | 0.000 *** |
ROE→GRO | 8.071 | 0.000 *** |
EFF→ROE | 6.796 | 0.000 *** |
ROE→EFF | 5.042 | 0.022 ** |
TAN→ROE | 1.038 | 0.452 |
ROE→TAN | 0.882 | 0.348 |
Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content. |
© 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
Share and Cite
Wu, N.; Zhao, J.; Musah, M.; Ma, Z.; Zhang, L.; Zhou, Y.; Su, Y.; Agyemang, J.K.; Asiamah, J.A.; Cao, S.; et al. Do Liquidity and Capital Structure Predict Firms’ Financial Sustainability? A Panel Data Analysis on Quoted Non-Financial Establishments in Ghana. Sustainability 2023, 15, 2240. https://doi.org/10.3390/su15032240
Wu N, Zhao J, Musah M, Ma Z, Zhang L, Zhou Y, Su Y, Agyemang JK, Asiamah JA, Cao S, et al. Do Liquidity and Capital Structure Predict Firms’ Financial Sustainability? A Panel Data Analysis on Quoted Non-Financial Establishments in Ghana. Sustainability. 2023; 15(3):2240. https://doi.org/10.3390/su15032240
Chicago/Turabian StyleWu, Ning, Jingyi Zhao, Mohammed Musah, Zhiqiang Ma, Lijuan Zhang, Yutong Zhou, Yongzheng Su, Joseph Kwasi Agyemang, Juliana Anyei Asiamah, Siqi Cao, and et al. 2023. "Do Liquidity and Capital Structure Predict Firms’ Financial Sustainability? A Panel Data Analysis on Quoted Non-Financial Establishments in Ghana" Sustainability 15, no. 3: 2240. https://doi.org/10.3390/su15032240