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Effect of Cash Conversion Cycle on the Profitability of Public Listed Insurance Companies

Author

Listed:
  • E. Chuke Nwude

    (Department of Banking and Finance, Faculty of Business Administration, University of Nigeria, Nsukka, Enugu Campus, Nigeria,)

  • Elias I. Agbo

    (Department of Accounting/Banking and Finance, Faculty of Management and Social Sciences, Godfrey Okoye University, Ugwuomu-Nike, Enugu, Nigeria,)

  • Christian Ibe-Lamberts

    (Fidelity Bank Plc, Abakaliki, Ebonyi State, Nigeria)

Abstract

Cash Conversion Cycle (CCC) constitutes a powerful metric for discovering how efficiently a company manages its working capital. A company that possesses low CCC is more efficient as it turns its working capital over many times in one year and allows it to generate more sales for the cash invested. This paper sets out to investigate the effect of CCC on the Return on Assets of selected Nigerian quoted insurance firms for the period (2000- 2011). The Return on Assets (ROA) is used as a measure of profitability. Data were collected from the annual financial reports of sampled insurance companies. Multiple regression technique was used in analyzing the model for testing the hypotheses. ROA was used as the dependent variable. While CCC was presented as the explanatory variable, Current Ratio, Debt Asset Ratio, Fixed Financial Total Asset Ratio, Growth and Size were all incorporated in the model as control variables. The results indicated that Cash Conversion Cycle had negative and significant effect on profitability. Based on the findings, the study recommends that Nigerian insurance companies should endeavour to reduce their number of days in Cash Conversion Cycle always in order to enhance their profitability.

Suggested Citation

  • E. Chuke Nwude & Elias I. Agbo & Christian Ibe-Lamberts, 2018. "Effect of Cash Conversion Cycle on the Profitability of Public Listed Insurance Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 111-117.
    • Handle: RePEc:eco:journ1:2018-01-15
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    Citations

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    Cited by:

    1. Raza Ali & Tursoy Turgut & Shaikh Erum & Shaikh Ahsan-ul-Haque, 2024. "Investigating the Symmetric Effects of Working Capital on Profitability in Turkish Banking: An ARDL Empirical Analysis," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 34(1), pages 74-97, March.
    2. Bilgehan TEKİN & Yusuf GÖR, 2022. "Cash conversion cycle and its relationship with profitability as a cash management tool in companies: An application on companies trading in Borsa Istanbul," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(632), A), pages 113-130, Autumn.
    3. Johan, Sofia & Kayani, Umar Nawaz & Naeem, Muhammad Abubakr & Karim, Sitara, 2024. "How effective is the cash conversion cycle in improving firm performance? Evidence from BRICS," Emerging Markets Review, Elsevier, vol. 59(C).
    4. Karolina Puławska, 2021. "Financial Stability of European Insurance Companies during the COVID-19 Pandemic," JRFM, MDPI, vol. 14(6), pages 1-16, June.

    More about this item

    Keywords

    Cash Conversion Cycle; Return on Assets; Working Capital; Profitability; Nigeria;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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