IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v6y2022i6p143-153.html
   My bibliography  Save this article

Cash Conversion Cycle and Firm Performance in Nigeria: A Sectoral Analysis

Author

Listed:
  • NWOKOYE, Gladys Anwuli (Ph.D)

    (University of Benin, Edo State, Nigeria)

Abstract

This paper sought to investigate the effect of cash conversion cycle proxied as: days inventory turnover (DIO), days payables outstanding (DPO) and days sales outstanding (DSO), on the performance of quoted firms in two sectors in Nigeria. This was done within a multivariate framework, using pooled OLS and multivariate panel regression technique and with data that covered the 2010 to 2020 reference period. The results obtained were generally well behaved in that they largely conform to presumptive expectations. The empirical evidence show, for example, that days inventory turnover (DPO) and days sales outstanding (DSO) affect movements in firm performance negatively among firms in the consumer goods sector, though only the DSO variable show significant impact. The same variables affect the sampled firms in the manufacturing sector differently. Results show that the days payable outstanding (DPO) and the days sales outstanding (DSO) variables affect performance of the sampled manufacturing firms positively but insignificant and significantly negative impact respectively. The days inventory turnover variable on the other hand, was found to show positive and significant effect on performance of firms in the consumer goods sector, whereas, it affects the sampled firms in the manufacturing sector negatively but in a significant manner. The outcomes therefore suggest the need for optimal cash conversion cycle policy such that has growth tendencies as options. Strategies recommended to abate or minimize the risk of losing sales and customer loyalty include: optimal working capital, improved liquidity, offer of trade credits, proper monitoring of inventory and repayment periods to guarantee enhanced firm performance

Suggested Citation

  • NWOKOYE, Gladys Anwuli (Ph.D), 2022. "Cash Conversion Cycle and Firm Performance in Nigeria: A Sectoral Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(6), pages 143-153, June.
    • Handle: RePEc:bcp:journl:v:6:y:2022:i:6:p:143-153
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-6-issue-6/143-153.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/cash-conversion-cycle-and-firm-performance-in-nigeria-a-sectoral-analysis/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    2. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
    3. Boisjoly, Russell P. & Conine, Thomas E. & McDonald, Michael B., 2020. "Working capital management: Financial and valuation impacts," Journal of Business Research, Elsevier, vol. 108(C), pages 1-8.
    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. Chen, Catherine Huirong & Choy, Siu Kai & Tan, Yongxian, 2022. "The cash conversion cycle spread: International evidence," Journal of Banking & Finance, Elsevier, vol. 140(C).
    2. Zheng, Xiaotian & Zhou, Youcheng & Iqbal, Sajid, 2022. "Working capital management of SMEs in COVID-19: role of managerial personality traits and overconfidence behavior," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 439-451.
    3. Barros, Victor & Falcão, Pedro Fontes & Sarmento, Joaquim Miranda, 2022. "Are more sustainable firms able to operate with lower working capital requirements?," Finance Research Letters, Elsevier, vol. 46(PB).
    4. Ahmed Mohamed Habib & Nahia Mourad, 2022. "Analyzing the Efficiency of Working Capital Management: a New Approach Based on DEA-Malmquist Technology," SN Operations Research Forum, Springer, vol. 3(3), pages 1-20, September.
    5. Afrifa, Godfred Adjapong & Tingbani, Ishmael & Adesina, Oluseyi Oluseun, 2022. "Stochastic frontier modelling of working capital efficiency across Europe," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    6. Hossain Mohammad Reyad & Mohd Ashhari Zariyawati & Tze San Ong & Haslinah Muhamad, 2022. "The Impact of Macroeconomic Risk Factors, the Adoption of Financial Derivatives on Working Capital Management, and Firm Performance," Sustainability, MDPI, vol. 14(21), pages 1-19, November.
    7. Grzegorz Zimon & Dominik Zimon, 2020. "Quality Management Systems and Working Capital SMEs in GPO—A Case of Poland," Administrative Sciences, MDPI, vol. 10(4), pages 1-13, October.
    8. Luca Sensini & Maria Vazquez, 2023. "Effects of Working Capital Management on SME Profitability: Evidence from an Emerging Economy," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(4), pages 1-85, February.
    9. Burney, Robert B. & James, Hui Liang & Wang, Hongxia, 2021. "Working capital management and CEO age," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    10. Tarkom, Augustine, 2022. "Impact of COVID-19 exposure on working capital management: The moderating effect of investment opportunities and government incentives," Finance Research Letters, Elsevier, vol. 47(PB).
    11. Abdul Basyith & Abid Djazuli & Fitriya Fauzi, 2021. "Does Working Capital Management Affect Profitability? Empirical Evidence from Indonesia Listed Firms," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(3), pages 236-251, March.
    12. Mattia Iotti & Giuseppe Bonazzi, 2023. "Financial Sustainability in Agri-Food Companies: The Case of Members of the PDO Parma Ham Consortium," Sustainability, MDPI, vol. 15(5), pages 1-31, February.
    13. Giuseppe Bonazzi & Paolo Camanzi & Giovanni Ferri & Elisa Manghi & Mattia Iotti, 2021. "Economic Sustainability of Pig Slaughtering Firms in the Production Chain of Denomination of Origin Hams in Italy," Sustainability, MDPI, vol. 13(14), pages 1-18, July.
    14. Banerjee, Pradip & Dutta, Shantanu & Zhu, Pengcheng, 2021. "Multidimensionality of text based financial constraints and working capital management," International Review of Financial Analysis, Elsevier, vol. 77(C).
    15. Tuba DERYA-BASKAN & Eda BALIKÇIOĞLU, 2018. "Firma Bileşenlerinin Halka Açık Perakende Firmalarında Kurumlar Vergisine Etkisi," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(37).
    16. Simranjeet Singh & Harwinder Kaur, 2017. "Working Capital Management and Profitability: Evidence from Selected Steel Manufacturing Companies in India," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 8(2), pages 73-79, May.
    17. Sofie Balcaen & Sophie Manigart & Hubert Ooghe, 2011. "From distress to exit: determinants of the time to exit," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 407-446, August.
    18. Genesis Gyasi Sah & Judit Furedi-Fulop, 2022. "The Effects of Proper Inventory Management on the Profitability of SMEs," Technium Social Sciences Journal, Technium Science, vol. 32(1), pages 340-351, June.
    19. María Angélica Arbeláez & Alejandro Becerra & Francisco Fernández & David Forero, 2019. "El sector comercio en Colombia y el crédito de proveedores," Informes de Investigación 17610, Fedesarrollo.
    20. Naumoski Aleksandar, 2022. "Financial Policy and Companies’ Sustainable Growth," Economic Themes, Sciendo, vol. 60(3), pages 281-301, September.

    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:6:p:143-153. 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.