Effect of Working Capital Management On the Profitability of Listed Consumer Goods Firms in Nigeria
Abstract
Despite extensive research in corporate finance, the relationship between working capital management (WCM) and firm performance remains inconclusive, with empirical findings differing across industries, countries, and methodological approaches. While prior studies identify inventory turnover, receivables, payables, and the cash conversion cycle as key components of WCM, their effects on firm outcomes vary widely, especially within developing economies where liquidity constraints and market volatility are more pronounced. Moreover, existing studies on WCM in Nigeria have predominantly focused on conglomerates, manufacturing, and financial firms, with limited attention to the consumer goods sector a sector characterized by high working capital intensity and rapid inventory cycles. These inconsistencies and contextual gaps justify further empirical investigation. This study therefore examined the effect of working capital management on the profitability of listed consumer goods firms in Nigeria. A longitudinal panel research design was adopted. The target population consisted of 21 consumer goods firms listed on the Nigerian Exchange Group (NGX) as at 31st December 2023. Using purposive sampling based on availability of complete data, 13 firms with consistent annual reports covering 2013–2023 were selected. Secondary data were extracted from audited annual reports and analyzed using descriptive statistics, correlation analysis, and panel regression techniques. Findings revealed that inventory turnover, cash conversion cycle, and payables management have positive and significant effects on return on equity (ROE), while receivables management exerts a negative and significant effect on profitability. The study concludes that efficient management of working capital components is essential for improving profitability among Nigerian consumer goods firms. It recommends that managers strengthen receivables collection strategies, optimize inventory levels, and reduce the cash conversion cycle in order to sustain profitability and enhance competitiveness within the sector.
Keywords
Working Capital Management, Profitability, Listed Consumer Goods Firms, Nigeria.
Citations
IRE Journals:
Lawal Qodir Olayinka, Lawan Yahaya, Shittu O. Ibrahim "Effect of Working Capital Management On the Profitability of Listed Consumer Goods Firms in Nigeria" Iconic Research And Engineering Journals Volume 9 Issue 6 2025 Page 482-503
IEEE:
Lawal Qodir Olayinka, Lawan Yahaya, Shittu O. Ibrahim
"Effect of Working Capital Management On the Profitability of Listed Consumer Goods Firms in Nigeria" Iconic Research And Engineering Journals, 9(6)
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