IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v6y2022i11p868-880.html
   My bibliography  Save this article

Moderating Role of Managerial Ownership on the Effect of Cash Conversion Cycle and Receivable to Payable ratio on Firm Performance in Listed Industrial and Consumer Goods Companies in Nigeria

Author

Listed:
  • LAMBE, Isaac, Ph.D

    (Department of Accounting, Bingham University, Karu, Nasarawa State, Nigeria)

  • ORBUNDE, Bemshima, Ph.D

    (Department of Accounting, Bingham University, Karu, Nasarawa State, Nigeria)

  • TION, Williams A.

    (Department of Accounting, Bingham University, Karu, Nasarawa State, Nigeria)

  • HARUNA, Dzugwahi

    (Department of Accounting, Bingham University, Karu, Nasarawa State, Nigeria)

Abstract

Cash management is an essential requirement for an organization to stay afloat. The liquidity position of such business entity can determine how it is being treated in the marketplace. Therefore, ensuring a shorter time lag between when credits are given and when they are converted back to cash is very important in working capital management. Receivable to payable ratio addresses the number of days a company will allow its money with customers in relation to what is allowed by the supplier. The purpose of this research was to investigate the relevance of accounts receivable and accounts payable management in publicly traded Nigerian firms engaged in manufacturing and retailing consumer and industrial goods. The sample of 26 listed Nigerian industrial and consumer goods businesses is from the Nigerian Exchange Group (NGX), and the data spans the years 2011 to 2021. The study utilized a correlation review and a multiple regression model to analyze the study’s variables and their relationships post hoc. Researchers found that the correlation between the accounts receivable to accounts payable ratio and ROA was significantly tempered by the degree of ownership concentration. This suggests that the beneficial effect of the receivables-to-payments ratio on financial performance is mitigated by the degree to which ownership is concentrated. Instead, a slowed cash conversion cycle due to high ownership concentration has a favourable and negligible impact on financial results. The report suggests, among other things, that the management of listed consumer and industrial products firms in Nigeria cultivate a long-term connection with their suppliers to gain access to trade finance in a more convenient, swift manner, which would improve the companies’ performance. The management should further put in place a very vibrant credit policy to help avoid any occurrence of poor account receivables.

Suggested Citation

  • LAMBE, Isaac, Ph.D & ORBUNDE, Bemshima, Ph.D & TION, Williams A. & HARUNA, Dzugwahi, 2022. "Moderating Role of Managerial Ownership on the Effect of Cash Conversion Cycle and Receivable to Payable ratio on Firm Performance in Listed Industrial and Consumer Goods Companies in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(11), pages 868-880, November.
    • Handle: RePEc:bcp:journl:v:6:y:2022:i:11:p:868-880
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-6-issue-11/868-880.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/moderating-role-of-managerial-ownership-on-the-effect-of-cash-conversion-cycle-and-receivable-to-payable-ratio-on-firm-performance-in-listed-industrial-and-consumer-goods-companies-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Greg Filbeck & Thomas M. Krueger, 2005. "An Analysis of Working Capital Management Results Across Industries," American Journal of Business, Emerald Group Publishing Limited, vol. 20(2), pages 11-20, October.
    2. Huiskonen, Janne, 2001. "Maintenance spare parts logistics: Special characteristics and strategic choices," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 125-133, May.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Murugesan Selvam & Jayapal Gayathri & Vinayagamoorthi Vasanth & Kasilingam Lingaraja & Sigo Marxiaoli, 2016. "Determinants of Firm Performance: A Subjective Model," International Journal of Social Science Studies, Redfame publishing, vol. 4(7), pages 90-100, July.
    5. Stefan Tangen, 2004. "Performance measurement: from philosophy to practice," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 53(8), pages 726-737, December.
    6. Shams ur Rahman & Khurshed Iqbal & Aamir Nadeem, 2019. "Effect of Working Capital Management on Firm Performance: The Role of Ownership Structure," Global Social Sciences Review, Humanity Only, vol. 4(1), pages 108-119, March.
    7. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. Greg Filbeck & Thomas M. Krueger, 2005. "An Analysis of Working Capital Management Results Across Industries," American Journal of Business, Emerald Group Publishing, vol. 20(2), pages 11-20.
    10. repec:eme:mfppss:v:39:y:2013:i:2:p:116-132 is not listed on IDEAS
    11. Elaheh Javadi & Hashem Nikoumaram, 2017. "The Effect of Ownership Structure on Cash Conversion Cycle in Listed Firms on Tehran Stock Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 453-458.
    12. Godfred Adjapong Afrifa & Ishmael Tingbani, 2018. "Working capital management, cash flow and SMEs' performance," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 19-43.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Palombini, Nathalie Vicente Nakamura & Nakamura, Wilson Toshiro, 2012. "Fatores determinantes da gestão do capital de giro no mercado brasileiro," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 52(1), January.
    2. Khémiri, Wafa & Noubbigh, Hédi, 2020. "Size-threshold effect in debt-firm performance nexus in the sub-Saharan region: A Panel Smooth Transition Regression approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 335-344.
    3. Bo-Hung Chiou & Shen-Ho Chang, 2020. "Influence of Investment Efficiency by Managers and Accounting Conservatism on Idiosyncratic Risks to Investors," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(1), pages 1-8.
    4. Asmund Rygh & Gabriel R. G. Benito, 2018. "Capital Structure of Foreign Direct Investments: A Transaction Cost Analysis," Management International Review, Springer, vol. 58(3), pages 389-411, June.
    5. Chan-Jane Lin & Tawei Wang & Chao-Jung Pan, 2016. "Financial reporting quality and investment decisions for family firms," Asia Pacific Journal of Management, Springer, vol. 33(2), pages 499-532, June.
    6. Nishant B. Labhane, 2019. "Dividend Policy Decisions in India: Standalone Versus Business Group-Affiliated Firms," Global Business Review, International Management Institute, vol. 20(1), pages 133-150, February.
    7. Agnieszka Kuś & Dorota Grego-Planer, 2021. "A Model of Innovation Activity in Small Enterprises in the Context of Selected Financial Factors: The Example of the Renewable Energy Sector," Energies, MDPI, vol. 14(10), pages 1-17, May.
    8. Luca Riccetti & Alberto Russo & Mauro Gallegati, 2015. "An agent based decentralized matching macroeconomic model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(2), pages 305-332, October.
    9. Koh, SzeKee & Durand, Robert B. & Watson, Iain, 2011. "Seize the moment: Opportunism in Australian capital markets," Pacific-Basin Finance Journal, Elsevier, vol. 19(4), pages 374-389, September.
    10. Xin Qu & Majella Percy & Fang Hu & Jenny Stewart, 2022. "Can CEO equity‐based compensation limit investment‐related agency problems?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2579-2614, June.
    11. Diana Hechavarría & Charles Matthews & Paul Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    12. Kim, Sang-Joon & Bae, John & Oh, Hannah, 2019. "Financing strategically: The moderation effect of marketing activities on the bifurcated relationship between debt level and firm valuation of small and medium enterprises," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 663-681.
    13. Andres, Christian & Cumming, Douglas & Karabiber, Timur & Schweizer, Denis, 2014. "Do markets anticipate capital structure decisions? — Feedback effects in equity liquidity," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 133-156.
    14. Z. Jun Lin & Shengqiang Liu & Fangcheng Sun, 2017. "The Impact of Financing Constraints and Agency Costs on Corporate R&D Investment: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 17(1), pages 3-42, March.
    15. Niclas Hagelin, 2003. "Why firms hedge with currency derivatives: an examination of transaction and translation exposure," Applied Financial Economics, Taylor & Francis Journals, vol. 13(1), pages 55-69.
    16. Ruixin Su & Tong Zheng & Yuzhao Zhong & Weizhou Zhong, 2023. "Role of Digital Inclusive Finance for High-Quality Business Development: A Study of China’s “Five Development Concept” Policy," Sustainability, MDPI, vol. 15(15), pages 1-21, August.
    17. Stavros E. Arvanitis & Theodoros V. Stamatopoulos & Dimitris Terzakis, 2018. "Is There a Non-linear Relationship of Market Value with Cash and Ownership?," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(1), pages 3-25, January-M.
    18. Anoshkina, Ekaterina S. (Аношкина, Екатерина) & Markovskaya, Elizaveta I. (Марковская, Елизавета), 2018. "Empirical Analysis of Capital Structure Determinants of Russian Oil and Gas Companies [Анализ Структуры Капитала Российских Компаний Нефтегазового Сектора]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 80-109, October.
    19. Cumming, Douglas J., 2005. "Capital structure in venture finance," Journal of Corporate Finance, Elsevier, vol. 11(3), pages 550-585, June.
    20. Christoph Börner & Dietmar Grichnik & Frank Reize, 2010. "Finanzierungsentscheidungen mittelständischer Unternehmer — Einflussfaktoren der Fremdfinanzierung deutscher KMU," Schmalenbach Journal of Business Research, Springer, vol. 62(2), pages 227-275, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:6:y:2022:i:11:p:868-880. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://www.rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.