AN ASSESSMENT OF THE NEXUS BETWEEN WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE: NIGERIAN EVIDENCE
Keywords:
Working Capital, Financial Performance, Nigeria.Abstract
This study examined Working Capital Management and Financial Performance of Listed Firms in Nigeria using a sample of sixty-nine (69) quoted firms in Nigeria drawn out of the listed non-financial firms in Nigeria and sourced from the Nigerian Stock Exchange (NSE) factbook, and annual reports of the firms over a 10years period (2012-2021). Several independent variables were employed for the purpose of the investigation namely; cash conversion cycle, account receivable management, account payable management, current ratio and unpaid dividend with returns on assets as the dependent variable. The statistical methods employed in this study includes descriptive statistics, correlation analysis, granger causality test, pooled panel Ordinary Least Square test, the Hausman test and the Fixed effect model, all of which were conducted at a significance level of 5%. The findings showed that the main variables that affect returns on assets significantly of publicly listed companies during the observed study period are cash conversion cycle, account receivable management and account payable management. Although, current ratio and unpaid dividend showed no significant impact. The findings suggested therefore that some aspects of working capital management have a significant impact on financial performance, while others do not. Based on the findings the study recommended that firms operating in Nigeria need to focus on improving their cash conversion cycle and accounts receivable management in order to enhance their financial performance, also policies that create an enabling environment that can firms in Nigeria effectively manage their working capital should be at the forefront of policy formulation.
Keywords: Working Capital, Financial Performance, Firms, Nigeria.
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