ABSTRACT

The study analyzed impact of working capital management on firms’ performance in Nigeria. Data was sourced from Annual Reports of five listed manufacturing companies in Nigeria from 2000 to 2018. The firms’ five manufacturing firms selected were Guinness Nig. Plc., Unilever Nig. Plc., Nestle Nig. Plc., 7^up Bottling Nig. Plc. and May & Baker Nig. Plc. Firms performance which was the dependent variables was measured by return on assets, while working capital management (WCM) was proxied by inventory conversion period, debt collection period and creditors’ payment period, cash conversion period and sales revenue. Other variables, that is, control variables like broad money supply and cash reserve ratio were included in the model. The data analysis commenced with the panel unit root test which revealed that the data collected had mixed integration, thus resulting to the use of pooled mean group (PMG) approach to panel data analysis. Prior to the PMG estimation, panel residual cointegration tests based on Pedroni and Kao approaches revealed that a long-run relationship existed between working capital measures and firm performance. The error correction mechanism of the PMG revealed a rapid adjustment from short-run disequilibrium to long-run equilibrium if the model. Specifically, the long-run equation showed that inventory conversion period, debt collection period and creditor’s payment period had negative long-run impact on return on assets of selected companies with only debt collection period been significant. On the other hand, cash collection period and sales revenue had positive and significant impact on return on assets in the long-run. These clearly confirmed that debt collection period, cash conversion period and sales revenue were the most significant working capital management variables in the regression model. Based on these findings, policies aimed at enhancing working capital management and performance of listed firms such as ensuring proper inventory management system, reducing debt collection period, improving cash conversion period were recommended.