The Effects of Cash Flow Management on the Financial Performance of Listed Manufacturing Firms in Ghana

Abstract

The study investigated the effect of cash flow management on financial performance of listed manufacturing firms in Ghana. Specifically, the study examined the effect of operating cash flows, investing cash flows, financing cash flows and free cash flows on financial performance. The study used a panel data of 10 conveniently selected firms over a 7-year period from 2012 to 2018. Pooled Ordinary Least Squares, Fixed Effect and Random Effect Models to analyze the data. The results indicates that operating cash flows has a negative and statistically significant impact on financial performance, investing cash flows does not have any significant effect on financial performance while financing cash flows has a direct and significant effect on financial performance. Lastly, free cash flow was found to have a positive and significant effect on financial performance of listed manufacturing firms in Ghana. The study concludes that policies by investors or equity holders should not focus entirely on investment cash flows but rather, operating cash flows, financing cash flows and free cash flows as they are found to significantly affect financial performance.

Keywords:Cash Flow management, financial performance, operating cash flow, investing cash flow, financing cash flow, free cash flow

DOI: 10.7176/RJFA/14-16-05

Publication date:August 31^st 2023