Corporate liquidity management of listed firms in Ghana

Abstract

Purpose

The purpose of this paper is to examine corporate liquidity management of companies listed on the Ghana Stock Exchange (GSE) with the aim of ascertaining the determinants of corporate liquidity holdings.

Design/methodology/approach

The paper adopts a dynamic panel model where a lagged dependable variable is introduced as an explanatory variable. Annual data from the annual reports and financial statements of the firms together with the GSE Factbook are used in the gathering of data spanning 1991‐2007. The Arrellano‐Bond estimator is used which incorporates the Sargan test for over identification.

Findings

Leverage is found to be not significant to Ghanaian‐listed firms' liquidity demand perhaps due to the developmental stage of the financial market. However, liquidity is found to be statistically significantly influenced by a target liquidity level, size of the firm, return on assets and net working capital.

Originality/value

This is the first of its kind in the country despite the numerous studies carried out on the GSE.

Citation

Isshaq, Z. and Alufar Bokpin, G. (2009), "Corporate liquidity management of listed firms in Ghana", Asia-Pacific Journal of Business Administration, Vol. 1 No. 2, pp. 189-198. https://doi.org/10.1108/17574320910989122