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
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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 |
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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
APA StyleWu, N., Zhao, J., Musah, M., Ma, Z., Zhang, L., Zhou, Y., Su, Y., Agyemang, J. K., Asiamah, J. A., Cao, S., Yao, L., & Li, K. (2023). Do Liquidity and Capital Structure Predict Firms’ Financial Sustainability? A Panel Data Analysis on Quoted Non-Financial Establishments in Ghana. Sustainability, 15(3), 2240. https://doi.org/10.3390/su15032240