Working Capital Management and Performance of Selected Nigerian Manufacturing Companies
The study determines whether the internal financial activity of working capital management affects the performance of Nigerian manufacturing companies. Data covering 2002-2011 from published financial statements of a panel of 75 manufacturing firms quoted on the Nigerian Stock Exchange (NSE) are analyzed using three alternative regression methods; namely fixed effect, random effect, and one-step difference GMM. We find that working capital management is an important determinant of manufacturing performance in Nigeria. In particular, receivable conversion period and inventory conversion period are directly or positively related to manufacturing performance. On the other hand, payable deferral period, cash conversion cycle and the debt-equity ratio period are inversely or negatively related to manufacturing performance. Additionally, liquidity (measured as quick ratio) has no significant relationship with manufacturing performance. Accordingly, we recommend liberal debt and aggressive inventory management strategies together with the pursuit of optimum debt profile to improve Nigeria’s manufacturing performance.
