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Research Journal of Business Management

Year: 2009 | Volume: 3 | Issue: 3 | Page No.: 73-84
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Authors

Olufemi I. Falope

Olubanjo T. Ajilore

Keywords

Research Article

Working Capital Management and Corporate Profitability: Evidence from Panel Data Analysis of Selected Quoted Companies in Nigeria

Olufemi I. Falope and Olubanjo T. Ajilore
The study aimed to provide empirical evidence about the effects of working capital management on profitability performance for a panel made up of a sample of Nigerian quoted non-financial firms for the period 1996-2005. The study utilized panel data econometrics in a pooled regression, where time-series and cross-sectional observations were combined and estimated. The study found a significant negative relationship between net operating profitability and the average collection period, inventory turnover in days, average payment period and cash conversion cycle for a sample of fifty Nigerian firms listed on the Nigerian Stock Exchange. Furthermore, the study found no significant variations in the effects of working capital management between large and small firms. These results suggest that managers can create value for their shareholders if the firms manage their working capital in more efficient ways by reducing the number of days accounts receivable and inventories to a reasonable minimum.
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Comments

Odondo Juma Alphonce Reply

The paper is well researched. it is adequate in form and content. congratulations.

David Mutua Mathuva Reply

A good paper indeed. Though I found some inconsistencies in the conclusion. From your regressions, I saw a positive relationship between Accounts Payable days and ROA, but in your conclusion, you indicate that a negative relationship. Please check. The other contention is in the use of fixed-effects estimation. A comparison of the results with the pooled OLS would have been better.

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