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International Journal of Innovation and Applied Studies
ISSN: 2028-9324     CODEN: IJIABO     OCLC Number: 828807274     ZDB-ID: 2703985-7
 
 
Saturday 08 August 2020

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An Assessment of the Relationship between Capital Investments and Financial Performance of Selected SMEs in the Upper East Region of Ghana


Volume 29, Issue 3, June 2020, Pages 760–770

 An Assessment of the Relationship between Capital Investments and Financial Performance of Selected SMEs in the Upper East Region of Ghana

Joseph Akurugo Adongo1, Isaac Luke Agonbire Atugeba2, and Baba Insah3

1 Bolgatanga Technical University, P. O. Box 767 Bolgatanga, Ghana
2 Bolgatanga Technical University, P. O. Box 767 Bolgatanga, Ghana
3 Dr. Hila Liman Technical University, Wa, Ghana

Original language: English

Received 25 April 2020

Copyright © 2020 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract


The relationship between capital investment and firms' financial performance has for some time been an important concern to many stakeholders in the business environment. This paper aims to study the effect of capital investments on financial performance from small and medium enterprises (SMEs) perspective. The study adopted a panel research design with a balanced data of 36 SMEs from the clientele list of three Accounting Firms in the Upper East region of Ghana. The study covered a period of five (5) years, from 2013-2017. The results were analysed using a fixed effect regression model. Capital investment was measured by the ratio of non-current assets to total assets while the financial performance was measured by the return on assets of the firms. The study revealed that the SMEs annual earnings have showed an upward trend over the study period with an average financial performance of 17.64 per cent. However, the average capital investment ratio was 32.04 per cent over the five-year period with a general downward trend in capital investments in the investment period. The study further established that capital investment as a sole variable has an adverse effect on SMEs financial performance. However, with firm-level variables (such as firm size and liquidity) and macro-economic variables (such as interest rate, exchange rate, and inflation rate) as control variables, the study established a significant and a positive effect of capital investments on financial performance. Based on the findings of the study, recommendations for owners and managers of SMEs have been developed.

Author Keywords: Capital investments, Financial performance, SMEs, Upper East region, Ghana.


How to Cite this Article


Joseph Akurugo Adongo, Isaac Luke Agonbire Atugeba, and Baba Insah, “An Assessment of the Relationship between Capital Investments and Financial Performance of Selected SMEs in the Upper East Region of Ghana,” International Journal of Innovation and Applied Studies, vol. 29, no. 3, pp. 760–770, June 2020.