Working capital policies and value creation of listed non-financial firms in Ghana: a panel FMOLS analysis

The article written by Siaw Frimpong has bee n published in Business and Economic Horizons, Volume 14(4), 2018.


The purpose of this study is to determine the effects of aggressive/ conservative working capital policies on value creation. Data from the10 non-financial firms listed on the Ghana Stock Exchange spanning over the period 2004-2015 was used for this study. The study adopted quantitative research design applied to panel cointegration and panel fully modified ordinary least square methodology. The panel cointegration results indicated that there is a long-run equilibrium relationship between working capital variables and shareholders’ value creation. The panel FMOLS results revealed that aggressive current asset investment policies enhance market-to-book ratio in the long-run. On the other hand, conservative current asset financing policies enhance market-to-book ratio in the long-run. 
This study has two contributions. First, prior studies investigated the relationship between the components of working capital management and shareholder value creation without looking at the specific policies being pursued and their effect on the shareholders’ value creation. Second, this study employs a contemporary econometric methodology in analyzing the data.
Keywords: Aggressive current asset investment policies, conservative current asset financing policies, panel cointegration, panel fully modified, market-to-book ratio