Cash Conversion Cycle and Value of Listed Oil and Gas Companies in Nigeria

Mohammed Ibrahim and Bula Yila Dengel

Review of Market Integration, 2021, vol. 13, issue 1, 20-41

Abstract: This study investigated the impact of cash conversion cycle on the value of listed oil and gas companies in Nigeria, with the specific objectives of determining its impact on share price and Tobin’s Q. To achieve this, panel data is applied with the use of descriptive, correlational and explanatory research design. The study hypothesised two research hypotheses and generalised least square regression is used in analysing the collected data that were extracted from the annual reports and accounts of eight listed oil and gas companies in Nigeria for the period 2006-2019. Share price and Tobin’s Q were used as proxies for value of firm. The study found that cash conversion cycle has a negative and significant impact on the value of listed oil and gas companies in Nigeria. In view of this finding, the study recommended, among others, that the cash conversion cycle should be reduced as reasonably possible below 365 days when the economic condition is good and vice versa when the economic situation is hard as this will enhance the value positively. It is further recommended that the individual components of cash conversion cycle, such as inventory, receivables and payables, be studied individually as net off effect exist using cash conversion cycle. JEL Classification: G31, G32

Keywords: Working capital management; cash conversion cycle; firm value; Tobin’s Q (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sae:revmar:v:13:y:2021:i:1:p:20-41

DOI: 10.1177/09749292211065191

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