WORKING CAPITAL MANAGEMENT OPTIMALITY AND FIRM VALUE: EVIDENT FROM THE NIGERIAN CONSUMER GOODS SECTOR – International Journal of Social Sciences and Management Review

WORKING CAPITAL MANAGEMENT OPTIMALITY AND FIRM VALUE: EVIDENT FROM THE NIGERIAN CONSUMER GOODS SECTOR

Authors: James Ese Ighoroje & Prof. Chinweobo E. Umeora

ABSTRACT

The paper studied working capital management Optimality (account receivable management-ARM, account payable management-APM, inventory management-INVM, cash conversion cycle-CCC, and cash conversion efficiency-CCE)and value (Tobins’ Q) of 9 selected quoted consumer goods firms in Nigeria from 2013 to 2020. The data were gotten from the Annual Financial Statements of the 9 selected quoted consumer goods firms in Nigeria from 2013 to 2020 with each having 72 data points for each of the variables. The panel data methodology was based on the random and fixed effects models ascertained using the Hausman Specification test. Evidently, the study supported the Random Effect Model. Furthermore, The study laid claim that showed that Optimality (account receivable management-ARM, account payable management-APM, inventory management-INVM, cash conversion cycle-CCC, and cash conversion efficiency-CCE) exhibited mixed effects on the value (Tobins’ Q) of the 9 selected quoted consumer goods firms in Nigeria from 2013 to 2020. Hence, the paper concludes that though account receivables, account payables, inventory, and cash conversion cycle are major drivers of working capital management but such effects are mixed. As such, managers of the consumer goods firms must ensure that it increases their unproductive bill payables while ensuring that all their unnecessary current liabilities are curtailed. More so, they should employ stock optimization techniques that can determine the right quantities of stock to hold. Lastly, they should try to improve the actual cash which was generated from sales within a given time period since cash conversion efficiency contributed minimally to firm value.

Keywords: Working Capital Management Optimality, Firm Value, Nigerian Consumer Goods Sector.

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