Budgeting and Its Effect on the Financial Performance of Listed Manufacturing Firms: Evidence from Manufacturing Firms Listed on Ghana Stock Exchange

Abstract

Organizations in both developed and developing countries face high competitions in the business sector. It is essential that businesses that want to remain competitive develop the desire of identifying the role of budgeting and its effect on their financial performance. In this regard, this study explored the role of budgeting and its effect on financial performance of listed manufacturing firms on the Ghana Stock Exchange as a case study. Specifically, the study sought to examine the role of budgeting and to analyze the impact of budgeting on the financial performance of these firms. Both cross-sectional and convenient sampling techniques were used to select fifty-one (51) respondents as the sample size of the study. Questionnaires were used to obtain data from the respondents. The correlation matrix was used to establish a positive relationship between budgeting and financial performance. The study discovered that budgeting plays imperative roles in the financial performance of listed manufacturing firms. The study again unveiled that there is a strong positive correlation between budgeting and financial performance. The study also concludes that planning; monitoring and control; coordination and evaluation plays a vital role and has a positive effect on the financial performance of manufacturing firms. The study recommends that managers must produce comprehensive budgetary plans to enable the employment of long-term plans. Annual budgeting review must also be incorporated permanently to enable the manufacturing firms to identify key financial indicators for their business and how and when to monitor them and to plan for future operations, refine existing strategic plans and considers how they can respond to current competitions.

Keywords: Budgeting, Financial Performance, Manufacturing Firms, Ghana Stock Exchange