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Cash Conversion Cycle and Value of Listed Oil and Gas Companies in Nigeria

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  • Mohammed Ibrahim
  • Bula Yila Dengel

Abstract

This study investigated the impact of cash conversion cycle on the value of listed oil and gas companies in Nigeria, with the specific objectives of determining its impact on share price and Tobin’s Q. To achieve this, panel data is applied with the use of descriptive, correlational and explanatory research design. The study hypothesised two research hypotheses and generalised least square regression is used in analysing the collected data that were extracted from the annual reports and accounts of eight listed oil and gas companies in Nigeria for the period 2006-2019. Share price and Tobin’s Q were used as proxies for value of firm. The study found that cash conversion cycle has a negative and significant impact on the value of listed oil and gas companies in Nigeria. In view of this finding, the study recommended, among others, that the cash conversion cycle should be reduced as reasonably possible below 365 days when the economic condition is good and vice versa when the economic situation is hard as this will enhance the value positively. It is further recommended that the individual components of cash conversion cycle, such as inventory, receivables and payables, be studied individually as net off effect exist using cash conversion cycle. JEL Classification: G31, G32

Suggested Citation

  • Mohammed Ibrahim & Bula Yila Dengel, 2021. "Cash Conversion Cycle and Value of Listed Oil and Gas Companies in Nigeria," Review of Market Integration, India Development Foundation, vol. 13(1), pages 20-41, April.
    • Handle: RePEc:sae:revmar:v:13:y:2021:i:1:p:20-41
    DOI: 10.1177/09749292211065191
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    References listed on IDEAS

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    4. Ratnam Vijayakumaran, 2019. "Efficiency of Working Capital Management and Firm Value: Evidence From Chinese Listed Firms," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(6), pages 133-144, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Working capital management; cash conversion cycle; firm value; Tobin’s Q;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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