The Impact of Working Capital and Debt Financing on the Profitability of Licensed Banks in Ghana

This paper examine the impact of working capital and debt financing on the profitability of twenty two 22 licensed banks in Ghana spanning from 2008 to 2018. To ascertain the influence of working capital and debt financing on the profitability of banks, the study adopt Generalized Linear Square GLS estimator and the Robust Random Fixed Effect Model RE to analyzed the data and explaining the model equation. Using a panel data approach, the study found that variable return on equity ROE used to measure profitability recorded a positive association with borrower's collection periods, bank cash conversion cycles, and debt financing presented by long term debts. Besides, the study also revealed no significant link between short term debts with ROE. Further, result from the main panel data disclosed that the moderating variables borrowers collection periods and short term debt BCP STD , bank cash conversion cycle and long term debt BCCC LTD exhibited a significant influence on the profitability surrogated by return on equity ROE . Whereas, the other interacting variables including BCP LTD and BCCC STD recorded no significant impact on return on equity. The study suggests that for banks to increase their profitability and maximize shareholders worth it recommended that working capital and debt financing is imperative which need to be managed efficiently and effectively to uphold the confidence in the Ghanaian banking industry. Elizabeth Sena Ajorsu | Jiang Hongli | Mohammed Musah "The Impact of Working Capital and Debt Financing on the Profitability of Licensed Banks in Ghana" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-1 , December 2020, URL: https://www.ijtsrd.com/papers/ijtsrd35855.pdf Paper URL : https://www.ijtsrd.com/management/accounting-and-finance/35855/the-impact-of-working-capital-and-debt-financing-on-the-profitability-of-licensed-banks-in-ghana/elizabeth-sena-ajorsu