WORKING CAPITAL MANAGEMENT STRATEGIES OF NIGERIAN MANUFACTURING INDUSTRIES AND FIRMS VALUE
DOI:
https://doi.org/10.61841/ya9xv666Keywords:
Working Capital Management, Earnings per Share, Firm Value, Manufacturing FirmsAbstract
This research explores the capital management strategies employed by Nigerian manufacturing industries and their impact on firm value, as measured by Earnings per Share (EPS). Employing an ex post facto research design, the study focuses on a population of 25 industrial goods industries, selecting a sample of 9 quoted manufacturing firms. The independent variables encompass various working capital management strategies, including accounts receivable management, accounts payable management, inventory management, cash conversion cycle, cash conversion efficiency, current assets to total assets ratio, and current liabilities to total assets ratio. The dependent variable is firm value, proxied by EPS. Results reveal both short-term and long-term effects of working capital management on EPS. The long-run model demonstrates significant negative relationships between accounts receivable management (ARM) and EPS, suggesting that efficient management of accounts receivables has a significant impact on financial performance. Conversely, accounts payable management (APM) exhibits a positive but non-significant effect. Inventory management (INVM) and cash conversion cycle (CCC) are positively related to EPS, with CCC and cash conversion efficiency (CCE) having significant effects. In the short run, the error correction model (ECM) indicates a negative and significant impact of deviations in accounts receivable management and cash conversion cycle on EPS. The study recommends among others that organizations focus on enhancing short-term corrective measures, such as agile and responsive strategies in accounts receivables, to ensure immediate and efficient impacts on financial performance.
References
. Abdulazeez, D. A., Baba, N. A., Fatima, K. R. &Abdulrahaman, Y. (2018). Working capital management and financial performance of listed conglomerate companies in Nigeria. Journal of Accounting, Finance and Auditing Studies, 4(2), 49-66.
. Abubakar, Y., Umaru, D., &Olumuyiwa O. O. (2020). Working capital management and financial performance of selected quoted firms in Nigeria. International Journal of Research and Scientific Innovation, VII(IV), 62 – 67.
. Akinleye G. T. &Adeboboye R. (2019). Assessing working capital management and performance of listed manufacturing firms: Nigeria evidence. Information Management and Business Review, 11(2), 27-34.
. Akoto, R. K., Awunyo-Vitor, D., & Angmor, P. L. (2013). Working capital management and profitability: Evidence from Ghanaian listed manufacturing firms. Journal of Economics and International Finance 5(9), 373-379
. Al-Mawsheki, R. M. S. A., Ahmad, N. B., & Nordin, N. B. (2019). The effects of efficient working capital management and working capital policies on firm performance: Evidence from Malaysian manufacturing firms.International Journal of Academic Research in Accounting, Finance and Management Sciences. 9 (3), 59-69.
. Anand, M. &Grupta C.P. (2002). Working capital performance of corporate India: An 29 empirical survey for the year 2000-2001. Management and Accounting Research, 2(1):54 – 68.
. Azam, M. &Haider, S. I. (2011). Impact of working capital management on firms’ performance: Evidence from non-financial institutions of KSE-30 index. Interdisciplinary Journal of Contemporary Research in Business, 3(5):482 – 492.
. Bagh, T., Nazir, M. I., Khan, M. A., Khan, M. A. &Razzaq, S. (2016). The impact of working capital management on firm’s financial performance: Evidence from Pakistan. International Journal of Economics and Financial Issues, 6(3), 1097-1105.
. Coase, R.H. (1937). The nature of the firm. Economica 4:386–405
. Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance and Accounting, 30(3): 573-587.
. EduPristine(2018). Working Capital Management. January 8 2018. Retrieved from https://www.edupristine.com/blog/working-capital-management.
. Etale, L. M., &Oweibi, G. T. (2020).Working capital management and profitability of Dangote Sugar Company listed on the NSE. International Journal of Economics, Commerce and Management, 8(5):380 – 396.
. Eya, C.I. (2016). Effect of working capital management 1 on the performance of food and beverage industries in Nigeria. Arabian Journal of Business and Management Review, 6(5): 1-7.
. Filbeck, G., & Kruegar, T.M. (2005).An analysis of working capital management results across industries. International Journal of Business, 20(2):11-18.
. Gao, J., & Wang, J. (2017). Is working capital information useful for financial analysts? Evidence from China. Emerging Markets Finance and Trade, 53(5):1135-1151. https://doi.org/10.1080/1540496X.2016.1278166
. Hayes, A. (2020). Q Ratio – Tobin's Q. Updated Oct 7, 2020. Retrieved from https://www.investopedia.com/terms/q/qratio.asp.
. Hennart, J. F. (1989) Can the “New Forms of Investment” Substitute For the “Old Forms”? A Transaction Costs Perspective. Journal of International Business Studies. Summer, pp. 211-234.
. Hoang, T. V. (2015). Impact of working capital management on firm profitability: the case of listed manufacturing firms on Ho Chi Minh Stock exchange. Asian Economic and Financial Review, 5(5), 779-789.
. IGI Global (2020). What is Cash Conversion Cycle (CCE). Retrieved from https://www.igi-global.com/dictionary/cash-conversion-cycle-cce/39180.
. Kajola, S. O., Nwaobia, A. &Adedeji, S. B. (2014). Working capital management and firm performance: Evidence from Nigerian listed firms. The International Journal of Humanities & Social Studies, 2(4), 121-129.
. Kasozi, J. (2017). The effect of working capital management on profitability: A case of listed manufacturing firms in South Africa. Investment Management and Financial Innovations, 14(2/2), 336-346.
. Kaur, V.H & Distt-Ropar, M. (2013). Managing efficiency and profitability through working capital: An empirical analysis of BSE 200 Companies, Asian Journal of Business Management, 3(3), 76 – 87.
. Khalid, R., Saif, T., Gondal, A. R. & Sarfraz, H. (2018) Working capital management and profitability. Mediterranean Journal of Basic and Applied Sciences, 2(2), 117-125.
. Kusuma, H. & Bachtiar, A. D. (2018). Working capital management and corporate performance: Evidence from Indonesia. Journal of Management and Business Administration. Central Europe, 26(2), 76–88.
. Le, H., Vu, K., Le, T., Du, N. & Tran, N. D. (2018). Impact of working capital management on financial performance: The case of Vietnam. International Journal of Applied Economics, Finance and Accounting, 3(1), 15-20.
. Ling, S. S. Ali, A. & Ming, W. W. P. (2019). Working capital management and firm performance: An empirical study for Malaysian public listed companies in property industry. Borneo Journal of Social Science & Humanities, 1 – 15. DOI: https://doi.org/10.35370/bjssh.2019.1.2-06
. Mabandla, N. Z &Makoni, P, L. (2019). Working capital management and financial performance: Evidence from listed food and beverage companies in South Africa. Academy of Accounting and Financial Studies Journal, 23(2), 1 – 10.
. Madugba, U. J. &Ogbonnaya, K.A.(2016). Working Capital Management and Financial Performance, Evidence From Manufacturing Companies in Nigeria, European Journal of Accounting, Auditing and Finance Research, 4 (9), 98- 106.
. Mekonnen J. (2011). Small business failure and bankruptcy: A survey of the literature. European Small Business Journal, 1(4), 47-59.
. Nastiti, P. K. Y, Atahau, A. D. R. & Supramono, S. (2019). Working capital management and its influence on profitability and sustainable growth. Business: Theory and Practice, 20, 61–68.
. Nguyen, A. H., Pham, H. T., & Nguyen, H. T. (2020). Impact of working capital management on firm's profitability: Empirical evidence from Vietnam. The Journal of Asian Finance, Economics, and Business, 7(3), 115-125.
. Nobanee, H., Abdullatif, M., & AlHajjar, M. (2011). Cash conversion cycle and firm’s performance of Japanese firms. Asian Review of Accounting, 19(2):147–156.
. Osuma, G. &Ikpefan, O. (2018). Working capital management and bank performance: empirical research of ten deposit money banks in Nigeria. Banks and Bank Systems, 13 (2), 49-61.
. Rahman, S., Iqbal, K., &Nadeem, A. (2019). Effect of working capital management on firm performance: The role of ownership structure. Global Social Sciences Review, 4(1), 108-119.
. Rindfleisch, A., & Heide, J. B., (1997). Transaction cost analysis: Past, present, and future applications. Journal of Marketing, 61: 30-53.
. Salkind, N. J. (2010). Ex-post-facto study. In: Encyclopedia of Research Design. DOI: https://dx.doi.org/10.4135/9781412961288.n145
. Sathamoorthi, C.R. (2002). The Management of Working Capital in selected co-operatives in Botswana. Finance India Delhi, 16(3): 1015-1034.
. Simon, S., Sawandi, N. & Abdul-Hamid, M. A. (2018). A reassessment of the relationship between working capital management and firm performance: evidence from non-financial companies in Nigeria. Investment Management and Financial Innovations, 15(3), 249-266.
. Simon, S., Sawandi, N. & Abdul-Hamid, M. A. (2019). Working capital management and firm performance: The moderating effect of inflation rates. Pertanika Journal of Social Science & Humanities, 27 (1), 235 – 257.
. Tarek, Y. & Rafik, M. (2020). The impact of working capital management on corporate’s performance: Evidence from Egypt. International Journal of Business and Management, 15(6), 151 – 162
. Tariq, H., Mumtaz, R. & Rehan, M. F. (2012). Working capital management and firm performance: Evidence from Pakistan. European Journal of Business and Management, 5(20), 86-91.
. Thorelli H. B. (1986). Networks: between markets and hierarchies. Strategic Management Journal, 41.
. Uguru, L. C., Chukwu, U. C. &Elom, J. O. (2018). Effect of working capital management on the profitability of brewery firms in Nigeria. IOSR Journal of Economics and Finance (IOSR-JEF), 9(2-II), 9 – 20.
. Vartak, P. &Hotchandani, V. (2019). Working capital management and firm performance: Evidence from Indian listed firm. International Journal of Management, Technology and Engineering, IX (IV), 913 – 925.
. Vijayakumaran, R. (2019). Efficiency of working capital management and firm value: Evidence from Chinese listed firms. International Journal of Financial Research, 10(6), 133 – 144.
. Wang, Z., Akbar, M & Akbar, A. (2020). The interplay between working capital management and a firm’s financial performance across the corporate life cycle. Sustainability, 12, 1-16; doi:10.3390/su12041661.
. Williamson, O. (1985). The economic institutions of capitalism. New York, NY: Free Press.
. Williamson, O. (1991). Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36,269-96.
. Yakubu, I. N., Alhassan, M. M. &Fuseini, A. (2017). The impact of working capital management on corporate performance: Evidence from listed non-financial firms in Ghana. European Journal of Accounting, Auditing and Finance Research, 5(3), 68-75.
. Yegon, C. K., Kiprono, K. J &Willy, C. (2014). Working capital management and corporate financial performance: Evidence from panel data analysis of selected quoted tea companies in Kenya. Research Journal of Finance and Accounting, 5(5), 53 – 62.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Journal of Advance Research in Business, Management and Accounting (ISSN: 2456-3544)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Terms & Condition
Submission -
Author can submit the manuscript through our online submission process or email us at the designated email id in contact details.
The other mode of submission not accepted than online and email.
Before submission please read the submission guidelines.
NN Publication accepts only article submitted in pdf/doc/docx/rtf file format. Another format except given file formats will no be considered .
Author will be responsible for the error mistakes in the submission files. The minor changes can be done without any cost after publication. But for major changes NN Publication may charges you the editing charges.
Publication (Online) -
The online publication is scheduled on last date of every month, but it can be delayed by 24 to 48 hours due to editorial process if huge number of articles comes to publish in single issue.
Automatic notificatation email will be sent to the all users on publication of an issue, so its author’s duty to check their email inbox or SPAM folder to get this notification.
After publication of article author can not withdraw their article.
If editor’s found any issue after publication of article then the NN Publication have the authority to remove the article from online website.
No refund will be provided after online publication of article.
Publication (Print) -
The print copy publication are sent as per the author’s request after 2 weeks of online publication of that issue.
NN Publication will ship the article by India Post and provide the consignment number on dispatch of print copy.
NN Publication follows all the guidelines of delivery provided by IndiaPost and hence not responsible for delay in delivery due to any kind of reasons.
Refund of hard copy will not be provided after dispatch or print of the journal.
NN Publication will be responsible for raise a complain if there is any issue occurs in delivery, but still will not be responsible for providing the refund.
NN Publication will be responsible to resend the print copy only and only if the print copy is lost or print copy is damaged in delivery / or there is delay more than 6 months.
According to India Post the delivery should be completed with in 1-3 weeks after dispatch of articles.
Privacy Policy-
NN Publicationl uses the email ids of authors and editors and readers for sending editorial or publication notification only, we do not reveal or sell the email ids to any other website or company.
