Effect of Working Capital Management Practices on the Performance of Listed Nigerian Pharmaceutical Companies

Onaolapo A.R. and Ajayi O.G.
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Onaolapo A.R.: Department Of Management And Accounting Ladoke Akintola University Of Technology, Ogbomoso, Oyo State.
Ajayi O.G.: Department Of Management And Accounting Ladoke Akintola University Of Technology, Ogbomoso, Oyo State.

International Journal of Research and Innovation in Social Science, 2023, vol. 7, issue 9, 466-479

Abstract: This study investigated the effect of working capital management practices on the performance of listed Nigerian pharmaceutical companies. Specifically, it examined the effect of working capital management components on Cash Flow Return on Investment. . Secondary data were extracted from audited annual reports and accounts of five selected pharmaceutical companies listed on the Nigerian Exchange Group (NGX) using judgmental sampling technique. Panel data regression was used to analyze the data collected over ten years period (2009-2019). Results of Panel Regression revealed that RTD (β=-1.44583,t=-2.69,p=0.007) and DR (β =-0.1275989,t=-3.40,p=0.001) have negative and significance effects on CFROI which implies that 1% increase in Receivable Turnovers in Days decreases Cash flow Returns on Investment by 1.44% and 1% increase in Debt Ratio decreases Cash flow Returns on Investment by 0.127%. The study therefore concluded that a significant and negative relationship existed between RTD, DR and Cash flow Returns on Investment of listed pharmaceutical companies in Nigeria. This study, therefore, recommended that Managers of pharmaceutical companies should maintain optimal level of stocks, decreases number of days receivables and depends on internal sources of fund than external sources in other to maximize cash flow returns on investment of pharmaceutical companies.

Date: 2023
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