Working Capital Management and Financial Performance: Further Evidence From Quoted Consumer Goods Firms in Nigeria

Abstract

Effective management of working capital that ensures a balance between profitability and liquidity is a fundamental part of overall corporate strategy to create value, and it is an important source of gaining competitive advantage. This study examined the effect of working capital management on financial performance of quoted consumer goods firms in Nigeria. The study used cross sectional research design and data was sourced from the sampled 16 quoted consumer goods companies on the Nigerian Stock Exchange, for the period 2005-2014. Both descriptive and inferential statistical methods were used in analysing the data gathered. Hausman test was also conducted to make a choice between random and fixed effect models of panel least square regression. The result showed that average payment period and average receivable period respectively have significant positive and negative effect on financial performance. The study recommends that businesses should always bargain for suppliers’ credit periods that are lengthier than those given to their customers to facilitate better financial performance.

Keywords: Working Capital Management, Working Capital Components, Financial Performance

JEL Classification: G32