The liquidity-profitability trade-off in Bulgaria in terms of the changed financial management functions during crisis

Raykov, Evgeni

doi:10.30924/mjcmi/2017.22.1.135

Cited by 13 publications

(15 citation statements)

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“…According to the authors, high volumes of available cash implies businesses are in a position to honor their financial obligations when they fall due without a default. As indicated by Onyekwelu et al (2018), Mulyana and Zuraida (2018), Mohd and Asif (2018), Raykov (2017), Abubakar et al (2018), Lyndon and Paymaster (2016), Syed (2015), and Ejike and Agha (2018), the types of assets held by corporations and the ease by which those assets could be easily turned into cash indicates how liquid the assets are.…”

Section: Review Of Related Literaturementioning

confidence: 98%

“…For instance, stocks and bonds are termed liquid assets because they can be turned into cash within minutes or hours; however, assets like land, buildings, and equipment among others can take days, months, or years before they can be converted into cash (Abubakar et al 2018;Ejike & Agha, 2018;Lyndon & Paymaster, 2016;Mohd & Asif, 2018;Mulyana & Zuraida, 2018;Onyekwelu et al 2018;Raykov, 2017;Syed, 2015). Liquidity and its affiliations with corporate financial performance has so many theories; however, this study was built on the trade-off theory and the Cash Conversion Cycle (CCC) theory of liquidity.…”

Section: Review Of Related Literaturementioning

confidence: 99%

“…Theoretical and Empirical Reviews Raykov (2017), Abubakar et al (2018), Lyndon and Paymaster (2016), Syed (2015), and Ejike and Agha (2018) explained liquidity as the capacity of an establishment to defray its short-term money-related commitments in a convenient way. According to the authors, high volumes of available cash implies businesses are in a position to honor their financial obligations when they fall due without a default.…”

Section: Review Of Related Literaturementioning

confidence: 99%

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Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Musah

Kong

et al. 2020

Sage Open

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The aim of this research was to establish the nexus between liquidity and the viability of quoted non-financial establishments in Ghana. Panel data deduced from the published annual reports of 15 entities for the period 2008 to 2017 was employed for the study. Preliminarily, cross-sectional reliance, unit root, serial correlation, heteroscedasticity, co-integration, and causality tests were respectively performed. Our findings established that there exists no cross-sectional reliance, and input variables are stationary and co-integrated with no presence of heteroscedasticity and serial correlation. Estimates from the random effects generalized least squares (GLS) regression showed that liquidity has significant adverse effect on the firms’ Return on Equity (ROE) but had insignificantly positive effect on ROE when surrogated by the cash flow ratio. Finally, test based on causalities uncovered that, with the exception of Current Ratio and ROE that are flanked by bidirectional liaison, no other causal affiliation was evidenced amid other variables. Policy recommendations are further discussed.

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Section: Review Of Related Literaturementioning

confidence: 98%

Section: Review Of Related Literaturementioning

confidence: 99%

Section: Review Of Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Musah

Kong

et al. 2020

Sage Open

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“…Liquidity plays an important role not only in the operations of an enterprise but also on profitability (Lamberg & Vålming, 2009;Pradhan & Shrestha, 2017). From the basic understanding of finance, one may think that the effect of liquidity on profitability is always negative as observed by Raykov (2017) in recent times. However, there is evidence that do not support this.…”

Section: Liquidity and Profitabilitymentioning

confidence: 99%

The Impact of Lagged R&D Expenses on Firm Performance: Empirical Evidence from the BSE Healthcare Index

Sinha

Mondal

2020

Colombo Bus. J

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The study finds the impact of lagged Research and Development expenditure on financial performance. The investigation analyses 69 pharmaceutical companies included in the BSE healthcare index (India) using secondary data for the period of 2008 to 2017. The two dependent variables which are considered separately are Return on Asset (ROA) and Return on Equity (ROE). The two estimated regression models show that both the lagged value and its quadratic term have a significant influence on the accounting-based measures. With regard to the control variables, size and leverage are found to influence negatively whereas liquidity poses a positive effect on these two accounting-based performance measures. The article contributes by highlighting that the true relationship between R&D and financial performance is represented by a U-shaped curve as evident in few other studies.

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“…Liquidity is the capacity of an establishment to defray its short-term financial obligations in a timely manner (Raykov, 2017 Burke, 2019). Liquidity and its affiliations with corporate financial performance has so many theories, however, this study was built on the trade-off theory of liquidity.…”

Section: Theoretical Reviewsmentioning

confidence: 99%

Liquidity-Profitability Trade-Off: A Panel Study of Listed Non-Financial Firms in Ghana

Kong¹,

Musah²,

Antwi³

2019

IJTSRD

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This study sought to explore the trade-off between liquidity and the profitability of non-financial firms listed on the Ghana Stock Exchange (GSE). A panel data extracted from the audited and published annual reports of fifteen (15) selected firms for the period 2008 to 2017 was used for the study. In the study, liquidity was surrogated by the Cash Flow Ratio (CFR) and the Cash Ratio (CaR), whilst profitability was proxied by Return on Capital Employed (ROCE). After undertaken some diagnostic and specification tests to address the basic assumptions of the Classical Linear Regression Model (CLRM), the study uncovered that, cash flow ratio had a significantly positive effect on the firms' profitability as measured by ROCE [β=0.1050416, (p=0.038)<0.05], but the cash ratio had an insignificantly negative influence on the firms' profitability as measured by ROCE [β= -0.0805403, (p=0.306)>0.05]. It was further discovered that, the cash flow ratio and the cash ratio had a combined significant effect on the firms' profitability as measured by ROCE [Wald chi2(1)=7.43, (p=0.0244)<0.05]. In order to ensure continuous survival and success, the firms should not play with the issue of liquidity management. The entities are expected to maintain an optimal liquidity level that will be capable of performing the 'twin' role of meeting their financial obligations and at the same time maximizing their shareholders' wealth. This optimal liquidity level could be obtained if the establishments are to meet the standards set by the Ghana Stock Exchange (GSE). Adhering to these standards will help the firms to reduce the cases of financial distress. In other words, the firms should keep an adequate level of liquidity that will not portend their going concern status, and yet allow them to make ample returns on their investments. Thus, the firms should strike a balance (trade-off) between their liquidity and profitability. Also, surplus liquidity and inadequate liquidity are two financial ailments that can simply wear down the firms' profitability. Therefore, the establishments must embrace liquidity management in their attempt to optimize profitability. This could be attained if the firms lessen the amounts they hold in cash and focus more on investments so that, they could gain higher returns rather than tying them down in idle cash. From the perspective of theory, the outcome of this study is in tandem with that of prior studies by bringing to light the effect of liquidity on firms' financial performance as measured by ROCE. The firms should therefore inculcate into their decisions the findings of this study so as to meet their operational and expansion needs, as well as the desires of their shareholders. `

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The liquidity-profitability trade-off in Bulgaria in terms of the changed financial management functions during crisis

Abstract: The analysis evaluates the basic functions of modern financial managers and important aspects related to their roles in

Cited by 13 publications

References 14 publications

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

The Impact of Lagged R&D Expenses on Firm Performance: Empirical Evidence from the BSE Healthcare Index

Liquidity-Profitability Trade-Off: A Panel Study of Listed Non-Financial Firms in Ghana

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