A Multivariate Analysis of Determinants of Profitability: Evidence from Selected Manufacturing Companies Listed on the Ghana Stock Exchange

Abstract

This study seeks to examine the determinants of profitability of manufacturing companies in Ghana. The study covered the period 2005-2015 using data gathered from five selected manufacturing companies listed on the Ghana Stock Exchange (GSE). The Study employed the Multivariate Regression Analysis Technique. Return on Assets, a measure of profitability, was used as the dependent variable whereas leverage, liquidity, firm size, tangibility, GDP, inflation and interest rate were used as the predictor variables. The findings of the study established that there is a statistically significant positive relationship between profitability, liquidity and firm size whereas leverage and interest rate show a statistically significant negative relationship with profitability. The macroeconomic environment in Ghana plays an essential role in the survival and profitability of manufacturing companies in Ghana as evident in the empirical results. Thus, it is vital that managers of the economy keep a close eye on the implications of their policies and their impact on the manufacturing sector in their attempt to grow the economy. Future research should consider the other equally important sectors of the economy. It should also include more variables such as taxation and regulation indicators, exchange rates, management quality and corporate governance to give room for a more robust result and findings. JEL CLASSIFICATIONS: L6, O14

Determinants of Profitability: A Study on Manufacturing Companies Listed on the Dhaka Stock Exchange

“…These coefficients illustrate to what extent each independent variable impact ROA. The beta coefficient of LEQ is -0.276 with a p-value of 0.000, which is statistically negatively significant at the 1% level, but varies from the findings of Egbunike and Okerekeoti (2018); Prempeh et al (2018); Chowdhury and Amin (2007) and Zaid et al (2014). This means that liquidity negatively impacts ROA.…”

“…First, liquidity has a statistically significant negative relationship with profitability, supporting Eljelly (2004), but varying from Egbunike and Okerekeoti (2018); Prempeh et al (2018); Chowdhury and Amin (2007); ; and Zaid et al (2014). It indicates that higher liquidity decreases profitability.…”

“…The beta coefficient of LEQ is -0.177 with a p-value of .015, which is statistically significant at the 5% level. This means that liquidity negatively impacts ROE but contradicts Egbunike and Okerekeoti (2018); Prempeh et al (2018); Chowdhury and Amin (2007) and Zaid et al (2014). The beta coefficient of LEV is -0.279 with a p-value of 0.001, which is statistically significant at the 1% level.…”

“…Liquidity is often defined as a firm's ability to settle short-term liabilities (Pervan et al, 2019). Egbunike and Okerekeoti (2018) and Prempeh, Sekyere, and Amponsah (2018) found a significant positive relationship between liquidity and profitability in Nigerian manufacturing firms. Chowdhury and Amin (2007), , Hirsch, Schiefer, Gschwandtner, and Hartmann (2014) and Zaid et al (2014) also found the same result, while Sur and Chakraborty (2011) found no significant relationship, and Eljelly 2004 Capital-intensive industries are required to take a high level of investment in fixed assets for starting up a business as well as for their overall functioning (Pervan et al, 2019).…”

A Mathematical Model for an Inventory Management and Order Quantity Allocation Problem with Nonlinear Quantity Discounts and Nonlinear Price-Dependent Demand

“…Efficient inventory management is crucial for large companies and retailers as it directly affects profitability [1,2]. A retailer's profits rely on factors such as the cost of purchasing items, the selling price, and the number of items sold in a given period.…”