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Effect of Working Capital Management Practices on the Performance of Listed Nigerian Pharmaceutical Companies

Author

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  • Onaolapo A.R.

    (Department Of Management And Accounting Ladoke Akintola University Of Technology, Ogbomoso, Oyo State.)

  • Ajayi O.G.

    (Department Of Management And Accounting Ladoke Akintola University Of Technology, Ogbomoso, Oyo State.)

Abstract

This study investigated the effect of working capital management practices on the performance of listed Nigerian pharmaceutical companies. Specifically, it examined the effect of working capital management components on Cash Flow Return on Investment. . Secondary data were extracted from audited annual reports and accounts of five selected pharmaceutical companies listed on the Nigerian Exchange Group (NGX) using judgmental sampling technique. Panel data regression was used to analyze the data collected over ten years period (2009-2019). Results of Panel Regression revealed that RTD (β=-1.44583,t=-2.69,p=0.007) and DR (β =-0.1275989,t=-3.40,p=0.001) have negative and significance effects on CFROI which implies that 1% increase in Receivable Turnovers in Days decreases Cash flow Returns on Investment by 1.44% and 1% increase in Debt Ratio decreases Cash flow Returns on Investment by 0.127%. The study therefore concluded that a significant and negative relationship existed between RTD, DR and Cash flow Returns on Investment of listed pharmaceutical companies in Nigeria. This study, therefore, recommended that Managers of pharmaceutical companies should maintain optimal level of stocks, decreases number of days receivables and depends on internal sources of fund than external sources in other to maximize cash flow returns on investment of pharmaceutical companies.

Suggested Citation

  • Onaolapo A.R. & Ajayi O.G., 2023. "Effect of Working Capital Management Practices on the Performance of Listed Nigerian Pharmaceutical Companies," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(9), pages 466-479, September.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:9:p:466-479
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    References listed on IDEAS

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    1. Mohsin Siraj & Muhammad Mubeen & Salman Sarwat, 2019. "Working capital management and firm performance: evidence from non-financial firms in Pakistan," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(2), pages 27-37, February.
    2. Mehdi Rezaie Ahmadabadi & Esmaeil Mehrabi & Ali Fazel Yazdi, 2013. "Impact of Working Capital Management on the Performance of the Firms Listed on the Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(3), pages 352-364, July.
    3. Mohsin Siraj & Muhammad Mubeen & Salman Sarwat, 2019. "Working Capital Management and Firm Performance: Evidence from Non-Financial Firms in Pakistan," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(2), pages 27-37.
    4. Randa Mohammed Shams Addin Al-Mawsheki & Norzalina Binti Ahmad & Norhafiza Binti Nordin, 2019. "The Effects of Efficient Working Capital Management and Working Capital Policies on Firm Performance: Evidence from Malaysian Manufacturing Firms," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(3), pages 59-69, July.
    5. Kesimli, Iffet & Gunay, Suleyman, 2011. "The impact of the global economic crisis on working capital of real sector in Turkey," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 4(1), pages 1-18, January.
    6. Iffet Gorkey Kesimli & Suleyman Gokhan Gunay, 2011. "The impact of the global economic crisis on working capital of real sector in Turkey," Business and Economic Horizons (BEH), Prague Development Center, vol. 4(1), pages 52-69, January.
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