Effect of Working Capital Management on the Performance of Quoted Manufacturing Companies in Nigeria

Abstract

The expectation placed on the role of manufacturing firms in the economy has turned out to be a mirage, especially in recent times. Many of the manufacturing companies have folded up while the few surviving ones are performing far below installed capacity due to the operational challenges in Nigeria. Thus, this study examined the effect of working capital management on the performance of quoted manufacturing companies in Nigeria. The specific objectives of this study were the inventory turnover period and account receivable period. The study employed the causal research design with the population of 69 quoted manufacturing companies in Nigeria. A sample size of 26 quoted manufacturing firms was selected using a judgmental sampling technique for companies that have required data for 2011-2021 period of study. Panel data regression analysis which comprises the time series and cross-section data was used. The findings revealed that the inventory turnover period has a positive and insignificant effect on the performance of quoted manufacturing companies in Nigeria, while the account receivable period has a negative and insignificant effect on the
performance of quoted manufacturing companies in Nigeria. The study concluded that the owners/managers of these companies did not properly manage their working capital components effectively as improvement in this area will enhance the increase in performance. This study therefore recommends among others that manufacturing firms formulate and implement effective inventory management systems that maximize inventory turnover period and be mindful of the time lag between credit sales and collection of receivables in order to improve their financial performance.