Skip to content
Research Article Open access CC BY 4.0

The Impact of Firm Size on Financial Decision-Making: Evidence from Ghana

Semanu Duame, Emmanuel Benson

Asian Journal of Economics, Business and Accounting · pp. 59–72 · Published 3 Aug 2023

10.9734/ajeba/2023/v23i181058

Abstract

The study's primary goal was to ascertain the influence firm size has on Ghanaian banks' financial decision-making. A quantitative technique was applied in the study. The study's secondary data came from the financial statements of five commercial banks. Ghana Commercial Bank, ADB Bank, SG-Ghana Bank, Zenith Bank, and Fidelity Bank. These commercial banks were chosen using a purposive sampling technique. A sample size of 50 was used to collect data for each bank from 2012 to 2021, yielding ten records for each bank. A double log panel regression model was used to analyze the relationship between financial decisions and some key financial performance indicators (KPIs), with the financial decision being the outcome variable whiles return on assets, leverage, total debt, total equity, firm size (Bank size) and time the predictor variables. The Haussmann test was then performed to select the most appropriate model for the banking panel data. Based on the test result (chisq = 2.6279, df=3, p = 0.4526), the FEM was selected. The results showed that return on assets had no significant relationship with financial decision-making. Leverage was found to be significantly related to financial decisions, but the influence was minimal. Firm size had the most influence on financial decisions and by far the most significant influence regarding which capital structure to maintain as a bank. Total debt played a significant positive role in financial decisions. The higher the total debt, the more debt the banks tended to take on. As a response, the study proposes that Banks relying on internal funds to finance their operations must do so efficiently and effectively to derive the benefits associated with firm size. On the other hand, banks relying on debt financing must do so with caution since there is the risk of interest escalating in the current economic climate.

Firm size financial decision-making KPIs profitability

References (22)

  1. 1 Theory of the firm: Managerial behavior, agency costs and ownership structure [DOI]
  2. 2 Corporate financing and investment decisions when firms have information that investors do not have [DOI]
  3. 3 Research design: qualitative, quantitative, and mixed methods approaches [DOI]
  4. 4 Purposeful Sampling for Qualitative Data Collection and Analysis in Mixed Method Implementation Research [DOI]
  5. 5 A three-component conceptualization of organizational commitment [DOI]
  6. 6 What Do We Know about Capital Structure? Some Evidence from International Data [DOI]
  7. 7 The Determinants of Capital Structure Choice [DOI]
  8. 8 Research Methodology: Methods And Techniques [DOI]
  9. 9 Nursing research: principles, process and issues [DOI]
  10. 10 An Empirical Test of the Impact of Managerial Self‐Interest on Corporate Capital Structure [DOI]
  11. 11 Financial Markets and Firm Dynamics [DOI]
  12. 12 Research Design and Methodology [DOI]
  13. 13 Determinants of Profitability: Evidence from Industrial Companies Listed on Muscat Securities Market [DOI]
  14. 14 Intervention Research [DOI]
  15. 15 Moderating effect of competitive strategies on the relation between financial leverage and firm performance: evidence from Jordan [DOI]
  16. 16 Does institutional ownership affect the relationship between accounting quality and cost of capital? A panel smooth transition regression approach [DOI]
  17. 17 The Mediation Effect of Financial Leverage on the Relationship between Ownership Concentration and Financial Corporate Performance [DOI]
  18. 18 Stock market development and economic growth of Brazil, Russia, India, China and South African (BRICS) Nations: An empirical research [DOI]
  19. 19 An Assessment of the Implementation of the National Policy on Local Economic Development by District Assemblies in Ghana [DOI]
  20. 20 Quantitative Methods in Research [DOI]
  21. 21 Cross-Country Determinants of Capital Structure Choice: A Survey of European Firms
  22. 22 American Economic Association [DOI]

Cited by 0

No indexed citations yet.

Related research

Article metrics

Real usage data collected on this platform.

11

Page views

0

PDF downloads

1

Outbound clicks

0

Citations

Views over time

Views by country

Approximate, from request IP at view time — not citizenship or institution. Countries with fewer than 5 views are grouped as "Other".

Traffic sources

Referring site, by host.

Views and downloads exclude known bots/crawlers. Citations combines this platform's own DOI-resolved index with each external source's own reported total — see Cited by above for individually listed citing works. Last refreshed 0 seconds ago.