Working Capital Management Practices and Profitability in Nigeria

Sunday Kajola, Peter Olatunji Olayiwola () and Jonathan Ehimen Ekpudu ()
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Peter Olatunji Olayiwola: Department of Accounting and Business Administration, University of Lagos, Akoka, Nigeria
Jonathan Ehimen Ekpudu: Department of Business Administration, Federal University of Agriculture, Abeokuta, Nigeria

Business & Management Compass, 2018, issue 3-4, 200-218

Abstract: The paper investigates the effect of working capital management practices on profitability of twenty-five Nigerian listed non-financial firms between financial years, 2010 and 2016. Pooled ordinary least squares (POLS) and Random effects generalised least squares (REGLS) were employed as data analytical tools. Result indicates that three of the components of working capital management practices (average collection period, inventory turnover period and cash conversion cycle) have significant influence on profitability of Nigerian firms. It therefore suggests that proper management of components of working capital is a means by which profitability and shareholders’ value can be increased. The outcome provides empirical evidence that Nigerian firms used aggressive policy as a working capital management practice in achieving organisational success during the period of study.

Keywords: Aggressive policy; Cash conversion cycle; Nigeria; Profitability; Working capital (search for similar items in EconPapers)
JEL-codes: G30 G39 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:vrn:journl:y:2018:i:3-4:p:200-218

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