Impact of Working Capital Management on Financial Performance of Listed Deposit Money Banks: Evidence from Nigeria
Author(s)
Ibukun M. Falayi , Owoola R. Ibukun-Falayi ,
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Abstract
The centerpiece of working capital management is about striking a balance between profitability and liquidity.This research work assessed the working capital management’s effect on the financial performance of ten (10)listed banks between 2012 and 2021 in Nigeria. Specifically, the research investigated the effect of borrowers’ collection period, cash conversion circle, and creditors’ payment period on the banks’ financial performance. The study’s data were collated from the annual financial statements of the selected banks for 10 years (2012-2021). The data were analyzed using correlation analysis, descriptive statistics, and a random effect model. The study found that borrowers’ collection length and creditors’ payment time had positive and significant effect on the return on assets whilecash conversion cycle had positive and insignificant effect on the return on assets of the sampled banks. The study based on the results however concluded that working capital management has a positive relationship with the money deposit banks’ financial performance in Nigeria. Meanwhile, the research recommended that the banks’ financial performance should be enhanced through effective management of working capital components having discovered its positive effect on the bank’s return on assets the proxy for financial performance.
Keywords
Bank’s cash conversion cycle, collection period, payment period, return on assets
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