WORKING CAPITAL MANAGEMENT AND CORPORATE PERFORMANCE OF QUOTED NIGERIAN COMPANIES

Abstract

The objectives of the study were to determine if there are significant differences in working capital management measures amongst listed industries on the Nigerian Stock Exchange and to examine the relationship between average collection period, inventory conversion period, average payment period, cash conversion cycle, net trading cycle and corporate performance. Secondary data were sourced from annual reports and accounts of the sampled Nigerian companies using some relevant NSE fact books for the study. A sample of 56 non-financial listed companies were used for the study. The study employed a longitudinal research design covering the period 2016-2020.Generalised least squares regression analysis was used to examine the relationship between the variables. Analysis of Variance (ANOVA) was also employed specifically to examine the differences in working capital management amongst the different sectors in Nigeria. The study revealed that there are no significant differences in working capital management measures amongst industries listed on the Nigerian Stock Exchange. The study also showed that Average Collection Period (ACP) has significant negative relationship with corporate performance, measured by profit after tax and that Inventory Conversion Period (ICP) has significant negative relationship with profitability, Cash Conversion Cycle (CCC) is negative and significant, Net trading cycle (NTC) has an insignificant negative relationship while average payment period (APP) has significant positive relationship with corporate performance. Based on the findings, it was recommended that firms should design their credit policies in a manner that will aid their firms to easily collect proceeds from receivables so as to efficiently reduce the occurrence of bad debts and to also improve the rate of inventory conversion by eliminating delays in the conversion process in order to increase profitability.