Comparative Predictive Abilities of Earnings and Operating Cash Flows on Future Cash Flows: Empirical Evidence from Ghana
Cash flow prediction is an essential component of economic decision making, particularly in inves... more Cash flow prediction is an essential component of economic decision making, particularly in investment and credit evaluation. This paper examines the comparative predictive ability of earnings and operating cash flows variables on future operating cash flows within a developing economy’s setting. Ordinary Least Squares (OLS) method is used to develop regression models over the period of 2002 to 2012. Current operating cash flows, as proxy for future operating cash flows, are regressed on past one, two and three years of earnings and operating cash flows as predictors. Results from the regression analysis reveals earnings and operating cash flows are significant in predicting future operating cash flows but have different predictive powers with earnings providing a superior comparative predictive ability on future cash flows. The paper therefore concludes that earnings are a better predictor of future operating cash flows than historical operating cash flows itself.
Does Commercial Banks Presence Enhance Profitability in Ghana?
Global Business Review
The last few decades have witnessed an increasing drive for bank presence across Ghana due to com... more The last few decades have witnessed an increasing drive for bank presence across Ghana due to commercial banks appetite for increased deposit mobilization. Although bank presence is crucial in savings mobilization for economic growth and development, its relationship with the financial performance of the banks is unknown within the context of a developing economy. The current study therefore investigates the implications of banks presence on the financial performance of the commercial banks in Ghana, using data from 2007 to 2013. Panel regression is used for the estimation. Our findings show that increasing banks presence does not necessarily translate into profitability of the commercial banks. A plausible deduction from the results indicate that growth in bank presence (bank branches) cannot improve alternate distribution channels of banks operations due to the strong competition in the financial sector, cost of operations and low savings culture in Ghana. The results also reveal ...
The effect of organizational justice delivery on organizational commitment
Journal of Global Responsibility, 2016
Purpose This study aims to examine the effect of organizational justice (OJ) delivery on organiza... more Purpose This study aims to examine the effect of organizational justice (OJ) delivery on organizational commitment (OC) while controlling variables that potentially confound this effect. These confound variable includes gender, education and tenure. Design/methodology/approach A causal quantitative field research and a cross-sectional research approach are used. A structured questionnaire is used to collect data from 463 randomly sampled employees of 13 commercial banks in Koforidua, Ghana. Structural equation modelling is used to analyze the data. Findings The study establishes that a statistically significant effect is made by OJ delivery on OC (p < 0.0001), even after controlling for the effects of gender, education and tenure. The model used also fits the data collected considerably (i.e. χ2 = 0.258; p-value = 0.611). Thus, the relationship between OJ and OC is not confounded by how long the employee has served on the job or by the highest educational level of employees. Howe...
Compliance with international financial reporting standards: the case of listed firms in Ghana
Journal of Financial Reporting and Accounting, 2016
Purpose This study aims to examine the association between five firm-specific characteristics and... more Purpose This study aims to examine the association between five firm-specific characteristics and the level of compliance with International Financial Reporting Standards (IFRS) by companies listed on Ghana Stock Exchange. The five firm-specific characteristics are firm size, profitability, leverage, auditor type and firm age. Design/methodology/approach The study uses dataset from 31 listed Ghanaian firms from 2008 to 2012. Random effect is used to examine the influence of the predictive variables on the level of IFRS corporate compliance. Findings The result reveals a positive significant relationship between the level of compliance and firm size, auditor type, cross-listing and sector (information and communications technology (ICT) and agro-forestry). On the contrary, the level of compliance exhibits a negative significant association with leverage and firm age. It is observed that the level of compliance is not related to profitability. The results are robust to different model...
One of the areas that has been a focus of intense debate when it comes to capital structure resea... more One of the areas that has been a focus of intense debate when it comes to capital structure research is whether to use the book value or market value of capital structure as the accurate measure of financial leverage (Salehi & Biglar, 2009). Various arguments have been raised in favour of which of the measures researcher should use in capital structure studies. However, much has not been done to determine which of the measures has a more significant relationship with financial performance. Therefore the thrust of this paper was to establish the relationship between capital structure measures and financial performance so to determine which of the capital structure measures has a stronger association with financial performance. Two definitions of capital structure measures (book value & market value) and six financial performance measures were used. For this study, fifteen companies on the Ghana Stock Exchange (GSE) were selected over a 6-year time period (2002-2007). The outcome of the study established that the capital structure of firms influences their performance. Many measures of firm performance were negatively correlated with financial leverage. Meaning, companies with less debt in Ghana have high profit margins and good financial performance. The study established that the market value of capital structure has a stronger relation with financial performance as compared to the book value. Researchers should therefore consider first, the use of market value in any studies on capital structure.
This paper investigated the impact of trade openness on economic growth volatility of Ghana from ... more This paper investigated the impact of trade openness on economic growth volatility of Ghana from 1970 to 2013, using cointegration and error correction techniques. Our findings show that both the long and short run economic growth volatility is positively influenced by changes in trade openness. Volatility in domestic credit to private sector, shocks after the economic liberalization and financial openness contributed negative to economic growth volatility in the short run. The major policy implication of our paper is that developing economies should take into consideration their own realities in their trade policies to limit economic growth volatility.
International Journal of Economics and Finance, 2014
SMEs are pivotal to economic growth globally. They are however, often said to be constrained by t... more SMEs are pivotal to economic growth globally. They are however, often said to be constrained by the lack of or limited access to funding. Despite this assertion, the nature of the credit constraint problem is not well known in Ghana especially regarding its various dimensions. Knowing these dimensions is critical to formulating appropriate policies to deal with the problem. The purpose of this paper is to provide empirical evidence on the various dimensions of the credit constraint problem in Ghana. The survey strategy of enquiry was employed based on the adoption of the direct method of determining credit constraints. It was observed amongst other things that the credit constraint is almost entirely a supply-side problem as the demand-side constraint is almost non-existent. It has been recommended amongst other things that intervention policies should focus on the very small business as the incidence and degree of constraint tends to be higher amongst them.
International Journal of Business and Management, 2014
One of the areas that has been a focus of intense debate when it comes to capital structure resea... more One of the areas that has been a focus of intense debate when it comes to capital structure research is whether to use the book value or market value of capital structure as the accurate measure of financial leverage ). Various arguments have been raised in favour of which of the measures researcher should use in capital structure studies. However, much has not been done to determine which of the measures has a more significant relationship with financial performance. Therefore the thrust of this paper was to establish the relationship between capital structure measures and financial performance so to determine which of the capital structure measures has a stronger association with financial performance. Two definitions of capital structure measures (book value & market value) and six financial performance measures were used. For this study, fifteen companies on the Ghana Stock Exchange (GSE) were selected over a 6-year time period (2002)(2003)(2004)(2005)(2006)(2007). The outcome of the study established that the capital structure of firms influences their performance. Many measures of firm performance were negatively correlated with financial leverage. Meaning, companies with less debt in Ghana have high profit margins and good financial performance. The study established that the market value of capital structure has a stronger relation with financial performance as compared to the book value. Researchers should therefore consider first, the use of market value in any studies on capital structure.
Cash flow prediction is an essential component of economic decision making, particularly in inves... more Cash flow prediction is an essential component of economic decision making, particularly in investment and credit evaluation. This paper examines the comparative predictive ability of earnings and operating cash flows variables on future operating cash flows within a developing economy's setting. Ordinary Least Squares (OLS) method is used to develop regression models over the period of 2002 to 2012. Current operating cash flows, as proxy for future operating cash flows, are regressed on past one, two and three years of earnings and operating cash flows as predictors. Results from the regression analysis reveals earnings and operating cash flows are significant in predicting future operating cash flows but have different predictive powers with earnings providing a superior comparative predictive ability on future cash flows. The paper therefore concludes that earnings are a better predictor of future operating cash flows than historical operating cash flows itself.
Comparative Predictive Abilities of Earnings and Operating Cash Flows on Future Cash Flows: Empirical Evidence from Ghana
Cash flow prediction is an essential component of economic decision making, particularly in inves... more Cash flow prediction is an essential component of economic decision making, particularly in investment and credit evaluation. This paper examines the comparative predictive ability of earnings and operating cash flows variables on future operating cash flows within a developing economy’s setting. Ordinary Least Squares (OLS) method is used to develop regression models over the period of 2002 to 2012. Current operating cash flows, as proxy for future operating cash flows, are regressed on past one, two and three years of earnings and operating cash flows as predictors. Results from the regression analysis reveals earnings and operating cash flows are significant in predicting future operating cash flows but have different predictive powers with earnings providing a superior comparative predictive ability on future cash flows. The paper therefore concludes that earnings are a better predictor of future operating cash flows than historical operating cash flows itself.
Does Commercial Banks Presence Enhance Profitability in Ghana?
Global Business Review
The last few decades have witnessed an increasing drive for bank presence across Ghana due to com... more The last few decades have witnessed an increasing drive for bank presence across Ghana due to commercial banks appetite for increased deposit mobilization. Although bank presence is crucial in savings mobilization for economic growth and development, its relationship with the financial performance of the banks is unknown within the context of a developing economy. The current study therefore investigates the implications of banks presence on the financial performance of the commercial banks in Ghana, using data from 2007 to 2013. Panel regression is used for the estimation. Our findings show that increasing banks presence does not necessarily translate into profitability of the commercial banks. A plausible deduction from the results indicate that growth in bank presence (bank branches) cannot improve alternate distribution channels of banks operations due to the strong competition in the financial sector, cost of operations and low savings culture in Ghana. The results also reveal ...
The effect of organizational justice delivery on organizational commitment
Journal of Global Responsibility, 2016
Purpose This study aims to examine the effect of organizational justice (OJ) delivery on organiza... more Purpose This study aims to examine the effect of organizational justice (OJ) delivery on organizational commitment (OC) while controlling variables that potentially confound this effect. These confound variable includes gender, education and tenure. Design/methodology/approach A causal quantitative field research and a cross-sectional research approach are used. A structured questionnaire is used to collect data from 463 randomly sampled employees of 13 commercial banks in Koforidua, Ghana. Structural equation modelling is used to analyze the data. Findings The study establishes that a statistically significant effect is made by OJ delivery on OC (p < 0.0001), even after controlling for the effects of gender, education and tenure. The model used also fits the data collected considerably (i.e. χ2 = 0.258; p-value = 0.611). Thus, the relationship between OJ and OC is not confounded by how long the employee has served on the job or by the highest educational level of employees. Howe...
Compliance with international financial reporting standards: the case of listed firms in Ghana
Journal of Financial Reporting and Accounting, 2016
Purpose This study aims to examine the association between five firm-specific characteristics and... more Purpose This study aims to examine the association between five firm-specific characteristics and the level of compliance with International Financial Reporting Standards (IFRS) by companies listed on Ghana Stock Exchange. The five firm-specific characteristics are firm size, profitability, leverage, auditor type and firm age. Design/methodology/approach The study uses dataset from 31 listed Ghanaian firms from 2008 to 2012. Random effect is used to examine the influence of the predictive variables on the level of IFRS corporate compliance. Findings The result reveals a positive significant relationship between the level of compliance and firm size, auditor type, cross-listing and sector (information and communications technology (ICT) and agro-forestry). On the contrary, the level of compliance exhibits a negative significant association with leverage and firm age. It is observed that the level of compliance is not related to profitability. The results are robust to different model...
One of the areas that has been a focus of intense debate when it comes to capital structure resea... more One of the areas that has been a focus of intense debate when it comes to capital structure research is whether to use the book value or market value of capital structure as the accurate measure of financial leverage (Salehi & Biglar, 2009). Various arguments have been raised in favour of which of the measures researcher should use in capital structure studies. However, much has not been done to determine which of the measures has a more significant relationship with financial performance. Therefore the thrust of this paper was to establish the relationship between capital structure measures and financial performance so to determine which of the capital structure measures has a stronger association with financial performance. Two definitions of capital structure measures (book value & market value) and six financial performance measures were used. For this study, fifteen companies on the Ghana Stock Exchange (GSE) were selected over a 6-year time period (2002-2007). The outcome of the study established that the capital structure of firms influences their performance. Many measures of firm performance were negatively correlated with financial leverage. Meaning, companies with less debt in Ghana have high profit margins and good financial performance. The study established that the market value of capital structure has a stronger relation with financial performance as compared to the book value. Researchers should therefore consider first, the use of market value in any studies on capital structure.
This paper investigated the impact of trade openness on economic growth volatility of Ghana from ... more This paper investigated the impact of trade openness on economic growth volatility of Ghana from 1970 to 2013, using cointegration and error correction techniques. Our findings show that both the long and short run economic growth volatility is positively influenced by changes in trade openness. Volatility in domestic credit to private sector, shocks after the economic liberalization and financial openness contributed negative to economic growth volatility in the short run. The major policy implication of our paper is that developing economies should take into consideration their own realities in their trade policies to limit economic growth volatility.
International Journal of Economics and Finance, 2014
SMEs are pivotal to economic growth globally. They are however, often said to be constrained by t... more SMEs are pivotal to economic growth globally. They are however, often said to be constrained by the lack of or limited access to funding. Despite this assertion, the nature of the credit constraint problem is not well known in Ghana especially regarding its various dimensions. Knowing these dimensions is critical to formulating appropriate policies to deal with the problem. The purpose of this paper is to provide empirical evidence on the various dimensions of the credit constraint problem in Ghana. The survey strategy of enquiry was employed based on the adoption of the direct method of determining credit constraints. It was observed amongst other things that the credit constraint is almost entirely a supply-side problem as the demand-side constraint is almost non-existent. It has been recommended amongst other things that intervention policies should focus on the very small business as the incidence and degree of constraint tends to be higher amongst them.
International Journal of Business and Management, 2014
One of the areas that has been a focus of intense debate when it comes to capital structure resea... more One of the areas that has been a focus of intense debate when it comes to capital structure research is whether to use the book value or market value of capital structure as the accurate measure of financial leverage ). Various arguments have been raised in favour of which of the measures researcher should use in capital structure studies. However, much has not been done to determine which of the measures has a more significant relationship with financial performance. Therefore the thrust of this paper was to establish the relationship between capital structure measures and financial performance so to determine which of the capital structure measures has a stronger association with financial performance. Two definitions of capital structure measures (book value & market value) and six financial performance measures were used. For this study, fifteen companies on the Ghana Stock Exchange (GSE) were selected over a 6-year time period (2002)(2003)(2004)(2005)(2006)(2007). The outcome of the study established that the capital structure of firms influences their performance. Many measures of firm performance were negatively correlated with financial leverage. Meaning, companies with less debt in Ghana have high profit margins and good financial performance. The study established that the market value of capital structure has a stronger relation with financial performance as compared to the book value. Researchers should therefore consider first, the use of market value in any studies on capital structure.
Cash flow prediction is an essential component of economic decision making, particularly in inves... more Cash flow prediction is an essential component of economic decision making, particularly in investment and credit evaluation. This paper examines the comparative predictive ability of earnings and operating cash flows variables on future operating cash flows within a developing economy's setting. Ordinary Least Squares (OLS) method is used to develop regression models over the period of 2002 to 2012. Current operating cash flows, as proxy for future operating cash flows, are regressed on past one, two and three years of earnings and operating cash flows as predictors. Results from the regression analysis reveals earnings and operating cash flows are significant in predicting future operating cash flows but have different predictive powers with earnings providing a superior comparative predictive ability on future cash flows. The paper therefore concludes that earnings are a better predictor of future operating cash flows than historical operating cash flows itself.
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