Impact of Ethical Behavior on Financial Performance of Firms Listed on Ghana Stock Exchange.

Abstract

The focus of this study was to assess the effect of organizational ethical behavior on the financial performance of firms in Ghana. Researchers have expressed concerns about the ethical behavior of firms in Ghana with regards to its effect on financial performance. The findings of this study will add to the literature, from which those in the field of academia can continually refer. The return on assets, as an indicator for the financial performance of firms, was adopted as the dependent variable. Independent variables were good ethical behavior (GEB), corruption reduction (C), and nepotism reduction (N). A cross-sectional survey design was followed for primary data and firms’ financial records were sources of secondary data. Thirty (30) corporate firms registered on the stock market were selected for the study.

A multiple regression analysis was conducted and findings presented in Tables and Figures. Results showed that firms’ adherence to ethical principles of conducting business stand the chance of increasing their financial performance up to 45.0, 38.4, and 43.7 % by unit increases in GEB, and decreases in C, and N respectively. All independent variables had positive correlations with the financial performance of firms studied (GEB, 0.349; C, -0.503; N, -0.680). On firms’ financial performance, the ROA of firms, according to findings is positively and strongly correlated to their adherence to ethical business standards.

Based on these findings, the study recommends that corporate firms pay more attention to practices that enhance good ethical behavior through the implementation of ethics policies, and reduce or eradicate nepotism to increase their chances of performing better financially. In addition, firms should ensure gender equality and equity, employee training on ethical standards of work, and encouragement of ethical leadership.

Keywords: Ethical behavior, Financial Performance, Organization, Listed companies.

DOI: 10.7176/EJBM/13-14-10

Publication date:July 31^st 2021