Exploring the Link between Operational Efficiency and Firms’ Financial Performance: An Empirical Evidence from the Ghana Stock Exchange (GSE)

Musah, M.; Kong, Y.; Mensah, I. A.

International Journal of Trend in Scientific Research and Development (IJTSRD)

2019

English

e-ISSN: 2456 - 6470

The purpose of this study was to explore the link between operational efficiency and the financial performance of non-financial firms listed on the Ghana Stock Exchange (GSE). Specifically, the study sought to determine the association between operational efficiency and the firms’ financial performance as measured by ROA; examine the connection between operational efficiency and the firms’ financial performance as measured by ROE; and to find out the affiliation between operational efficiency and the firms’ financial performance as measured by ROCE. Panel data sourced from the audited and published annual reports of fifteen (15) listed non-financial firms for the period 2008 to 2017 was used for the study. From the study’s Pearson Product-Moment Correlation Coefficient technique of data analysis, operational efficiency had a significantly negative association with the firms’ financial performance as measured by ROA [r= - 0.2981, (p=0.0002)<0.05]. Operational efficiency also had an insignificantly adverse relationship with the firms’ financial performance as measured by ROE [r= -0.0411, (p=0.6174)>0.05]. Finally, operational efficiency had an insignificantly inverse affiliation with the firms’ financial performance as measured by ROCE [r= -0.0055, (p=0.9471)>0.05]. In order to have increased levels of financial performance, managers of non-financial firms listed on the Ghana Stock Exchange (GSE) should carefully plan and forecast their activities by taken into consideration, the fluctuations in their operational efficiency. This is because, operational efficiency have been widely proven to have a statistically significant relationship with firms’ financial performance. The firms can also achieve viable operational efficiency by improving their capital base, reducing their operational costs, improving their asset quality, employing revenue diversification strategies as opposed to focused strategies, and by keeping the right amount of liquid assets.

Musah, M., Kong, Y., & Mensah, I. A. (2019). Exploring the link between operational efficiency and firms’ financial performance: An empirical evidence from the Ghana Stock Exchange (GSE). International Journal of Trend in Scientific Research and Development, 3(4), 1-7.