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Working Capital Management Practices and Profitability in Nigeria

Author

Listed:
  • Sunday Olugboyega Kajola

    (Department of Accounting, Federal University of Agriculture, Abeokuta, Nigeria)

  • Peter Olatunji Olayiwola

    (Department of Accounting and Business Administration, University of Lagos, Akoka, Nigeria)

  • Jonathan Ehimen Ekpudu

    (Department of Business Administration, Federal University of Agriculture, Abeokuta, Nigeria)

Abstract

The paper investigates the effect of working capital management practices on profitability of twenty-five Nigerian listed non-financial firms between financial years, 2010 and 2016. Pooled ordinary least squares (POLS) and Random effects generalised least squares (REGLS) were employed as data analytical tools. Result indicates that three of the components of working capital management practices (average collection period, inventory turnover period and cash conversion cycle) have significant influence on profitability of Nigerian firms. It therefore suggests that proper management of components of working capital is a means by which profitability and shareholders’ value can be increased. The outcome provides empirical evidence that Nigerian firms used aggressive policy as a working capital management practice in achieving organisational success during the period of study.

Suggested Citation

  • Sunday Olugboyega Kajola & Peter Olatunji Olayiwola & Jonathan Ehimen Ekpudu, 2018. "Working Capital Management Practices and Profitability in Nigeria," Business & Management Compass, University of Economics Varna, issue 3-4, pages 200-218.
    • Handle: RePEc:vrn:journl:y:2018:i:3-4:p:200-218
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    More about this item

    Keywords

    Aggressive policy; Cash conversion cycle; Nigeria; Profitability; Working capital;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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