International Journal of Finance and Commerce

International Journal of Finance and Commerce


International Journal of Finance and Commerce
International Journal of Finance and Commerce
2022, Vol. 4, Issue 2
Working capital management (WCM) optimality and financial performance parameters of firms in the Nigeria consumer goods sector

James Ese Ighoroje, Chinweobo E Umeora

The paper investigated the effect of working capital management (WCM) Optimality on the performance of consumer goods firms in Nigeria spanning from 2013 to 2020. Specifically, the study investigated the effects of WCM indicators on the return on assets-ROA, return on equity-ROE, and earnings per share-EPS, of consumer goods firms in Nigeria. WCM proxies were decomposed into five variables being account receivable management (ARM), account payable management (APM), inventory management (INVM), cash conversion cycle (CCC) and cash conversion efficiency (CCE). The data for the study were collected from the Financial Statement and Annual Accounts of the selected firms covering a data panel framework of 8 years period (2013 to 2020) and nine (9) firms which were selected; each has 72 observations for each variable. The analysis was based on fixed and random effects models determined using the Hausman test. The results showed that WCM has over 75% explanatory effect on ROA, ROE, EPS, firm value and EVA of consumer goods firms within the period under study. However, the WCM indicators exhibited mixed effects on the financial performance parameters. Hence, the study concludes that the major drivers of WCM are account receivables, inventory, account payables, and cash conversion cycle, with mixed effects. As such, the paper aver that among others that managers of the consumer goods firms should avoid holding unnecessary current liabilities that increase bill payable which are not productive because the unpaid liabilities have a negative influence on the returns on assets of consumer goods firms.
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How to cite this article:
James Ese Ighoroje, Chinweobo E Umeora. Working capital management (WCM) optimality and financial performance parameters of firms in the Nigeria consumer goods sector. International Journal of Finance and Commerce, Volume 4, Issue 2, 2022, Pages 32-40
International Journal of Finance and Commerce International Journal of Finance and Commerce