Working Capital Management and Corporate Profitability: Evidence from Panel Data Analysis of Selected Quoted Companies in Nigeria

摘要

The study aimed to provide empirical evidence about the effects of working capital management on profitability performance for a panel made up of a sample of Nigerian quoted non-financial firms for the period 1996-2005. The study utilized panel data econometrics in a pooled regression, where time-series and cross-sectional observations were combined and estimated. The study found a significant negative relationship between net operating profitability and the average collection period, inventory turnover in days, average payment period and cash conversion cycle for a sample of fifty Nigerian firms listed on the Nigerian Stock Exchange. Furthermore, the study found no significant variations in the effects of working capital management between large and small firms. These results suggest that managers can create value for their shareholders if the firms manage their working capital in more efficient ways by reducing the number of days accounts receivable and inventories to a reasonable minimum.