The Impact of Cash Conversion Cycle on Firm Profitability: Evidence from Nigerian Listed Telecommunication Companies
The objective of this study is to empirically find the effect of cash conversion cycle on corporate profitability of the ICT firms listed on the floor of the Nigerian Stock Exchange. Data are collected from all the listed firms from 2010 to 2014. The data are analyzed using multiple linear regression analysis and the robustness check shows that the data are normal. The findings indicate significant positive relationship between cash conversion cycle and corporate profitability.
The Impact of Cash Conversion Cycle on Firm Profitability: Evidence from Nigerian Listed Telecommunication Companies, Journal of Finance and Accounting.
Vol. 4, No. 6,
2016, pp. 342-350.
Abdulrasheed, A., Khadijat, A. Y., Sulu, I., and Olanrewaju, A. A. (2011). Inventory Management in Small Business Finance: Empirical Evidence from Kwara State, Nigeria. British Journal of Economics, Finance and Management Sciences, 2 (1): 49–57.
Afza, T., and Nazir, M. (2009). Impact of Aggressive Working Capital Management Policy on Firms’ Profitability. The IUP Journal of Applied Finance, 15 (8): 20-30.
Akinsulire, O. (2011). Financial Management. Seventh Edition, CEEMOL Publishers, Lagos.
Ali, W. (2010). The Impact of Working Capital Management on the Company’s' Industry and the Factors Affecting it. Being a paper presentation at the 19th Multi-national Finance Society Annual Conference, Krakon, Poland.
Alipour, M. (2011). Working Capital Management and Corporate Profitability: Evidence from Iran. World Applied Sciences Journal, 12 (7): 1093-1099.
Appuhami, B. R. (2008). The impact of firms' capital expenditure on working capital management: An empirical study across industries in Thailand. International Management Review, 4 (1), 8.
Attari, M. A. and Raza, K. (2012). The Optimal Relationship of Cash Conversion Cycle with Firm Size and Profitability. International Journal of Academic Research in Business and Social Sciences, 2 (4) ISSN: 2222-6990.
Brealey, A. and Myers, S. (1998). Principles of Corporate Finance. McGraw-Hill Book Company.
Charitou, M., Elfani, M., and Lois, P. (2010). The Effect of Working Capital Management on Firm’s Profitability: Empirical Evidence from an Emerging Market. Journal of Business and Economics Research, 8 (12): 63-68.
Charitou, M., Lois, P., & Santoso, H. B. (2012). The Relationship between Working Capital Management and Firm's Profitability: An Empirical Investigation for An Emerging Asian Country. The International Business & Economics Research Journal (Online), 11 (8), 839.
Churchill, N. C., and Mullin, J. W. (2001). How Fast Can Your Company Afford to Grow? Harvard Business Review, 79: 135-143.
Cooley, P. L. and P. F. Roden (1991). Business Financial Management. The Dryden Press.
Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance and Accounting, 30, pp 573-588.
Dong, H. P. and Su, J. (2010). The Relationship between Working Capital Management and Profitability: A Vietnam Case. International Research Journal of Finance and Economics 49: 59-67.
Eizadinia, N., and Taki, A. (2010). The survey of the effects of working capital management on the profitability of listed companies in Tehran Stock Exchange. Quarterly of Financial Accounting, 2 (5): 120-139.
Eljelly, A. M. (2004). Liquidity-Profitability Trade-off: An Empirical Investigation in an Emerging Market. International Journal of Commerce and Management 14 (2): 48-61.
Falope, O. I. and Ajilore, O. T. (2009). Working Capital Management and Corporate Profitability: Evidence from Panel Data Analysis of Selected Quoted Companies in Nigeria. Research Journal of Business Management 3 (3): 73–84.
Gabudean, R. C. (2007). Strategic Interaction and Co determination of Firms' Financial Policies. Job Market paper.
Garcia–Teruel, P. J. and Martinez-Solano, P. (2007). Effects of Working Capital Management on SME Profitability. International Journal of Managerial Finance 3 (2): 164–177.
Gill, A, Biger, N. and Mathur, N. (2010). The relationship Between Working Capital Management and Profitability: Evidence from the United States. http://astonjournals. com/bej accessed 06/012/2013
Hayajneh, O. S and Yassine, F. L. A (2011). The Impact of Working Capital Efficiency on Profitability – an Empirical Analysis on Jordanian Manufacturing Firms. International Research Journal of Finance and Economics, 66: 67-76.
Hyun-Han, S., and Soenen, L. (1998). Efficiency of working Capital Management and Corporate Profitability. Financial Practice and Education, 8 (2), 37-45.
Jeng-Ren, C., Li, C., and Han-Wen, W. (2006). The Determinants of Working Capital Management. Journal of American Academy of Business, Cambridge, 10 (1): 149-155.
Jose, M. L., Lancaster, C., and Stevens, J. L. (1996). Corporate Returns and Cash Conversion Cycles. Journal of Economics and Finance, 20 (1): 33-46.
Kamath, R., (1989). How useful are Common Liquidity Measures? Journal of Cash Management: 24-28.
Karadagli, E. C. (2012). The Effect of Working Capital Management on the Profitability of Turkish SMEs. British Journal of Economics, Finance and Management Sciences, 5 (2): 36-44.
Lazaridis, D. I. and Tryfonidis, D. (2006). The Relationship between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange. Retrieved from http://ssrn. com/abstract=931591 accessed 16/12/2013
Lee, J. (2001). The Cash Management Conundrum. Asia Money. 12 (2): 80-82.
Majeed, S., Makki, M. A. M, Saleem, S., and Aziz, T. (2013). The Relationship of Cash Conversion Cycle and Profitability of Firms: An Empirical Investigation of Pakistani Firms. Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB) An Online International Monthly Journal, 1 (1): 35-51 (ISSN: 2306 367X).
Maness, T. and Zietlow, J. T (1998). Short-Term Financial Management. Dryden Press, Orlando, Florida.
Mary, M. R., John, S. and Laurie, S. (2010). The Relationship between Inventory Management and Firm Profitability: Sector Consequences of Catastrophic Supply Chain Disruptions. California Journal of Operations Management, 8 (2): 39–54.
Napompech, K. (2012). Effects of Working Capital Management on the Profitability of Thai Listed Firms. International Journal of Trade, Economics and Finance, 3 (3): 227-232.
Nigeria economic fact sheet (2011) photos.state. gov/.../nigeria/.../December-EconomicF.
Nobanee, H and AlHajjar, M. (2009). Working Capital Management, Operating Cash Flow and Corporate Performance. http://ssrn. com/abstract=1471236 accessed 16/12/2013
Padachi, K. (2006). Trends in Working Capital Management and its Impact on Firms’ Performance: An Analysis of Mauritanian Small Manufacturing Firms. International Review of Business Research Papers, 2 (2): 45–58.
Pandey, I. M. (2008). Financial Management. Ninth Edition, Vikas Publishers, Delhi, India.
Panigrahi, A. K. (2013). Cash Conversion Cycle and Firms’ Profitability – A Study of Cement Manufacturing Companies of India. International Journal of Current Research, 5 (6):1484-1488.
Pouraghajan, A., Rekabdarkolaei, E. A., and Shafie, M. (2013). Investigation the Effects of Working Capital Management and Capital Structure on Profitability and Return on Assets (Case Study: A Selection from the Automotive Companies in Iran). Journal of Basic and Applied Scientific Research, 3 (4): 847-854, ISSN 2090-4304.
Raheman, A. and Nasr, M. (2007). Working Capital Management and Profitability – Case of Pakistani Firms. International Review of Business Research Papers 3 (1): 279–300.
Raheman, A., Afza, T., Qayyum, A. and Bodla, M. A. (2010). Working Capital Management and Corporate Performance of Manufacturing Sector in Pakistan. International Research Journal of Finance and Economics, 47 (14): 152-163.
Ramachandran, A. and Janakiraman, M. (2009). The Relationship between Working Capital Management Efficiency and EBIT. Managing Global Transitions, 7 (1): 61–74.
Rezazadeh, J., and Heidarian, J. (2010). Effects of Working Capital Management on the Profitability of Iranian Companies. Quarterly of Accounting Research, 2 (7): 20-33.
Richards, V. D. and Laughlin, E. J. (1980). A Cash Conversion Cycle Approach to Liquidity Analysis, Financial Management, Spring: 32-38.
Rimo, A., and Panbunyuen, P. (2010). The Effect of Company Characteristics on Working Capital Management: A Quantitative Study of Swedish Listed Companies. Student UMEÅ School of Business Spring Semester Master Thesis, Two-Year, 15 hp
Ross, S. A., Westerfield, R. W. and Jordan, B. D. (1999). Corporate Finance. Times Mirror/Mosby College Publishing.
Samiloglu, F., and Demirgunes, K. (2008). The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey. The International Journal of Applied Economics and Finance, 2 (1): 44-50.
Scherr, F. C. (1989). Modern Working Capital Management: Text and Cases. Prentice Hall Inc.
Shah, S. Z. A. and Chaudhry, S. N. (2013). Relationship between Cash Conversion Cycle and Profitability: Moderator Role of Firm Size. 2nd International Conference on Management, Economics and Finance (2nd ICMEF 2013) proceeding.
Schwab, K., & Sala-i-Martin, X. (Eds.). (2011, December). The global competitiveness report 2011-2012. Geneva: World Economic Forum.
Soenen, L. A. (1993). Cash Conversion Cycle and Corporate Profitability. Journal of Cash Management, 4: 53-58.
Srinivasan, V. and Kim, Y. H. (1986). Payments Netting in International Cash Management: A Network Optimization Approach. Journal of International Business Studies, 17 (2): 1-20.
Stewart, G. (1995). Supply Chain Performance Benchmarking Study Reveals to Supply Chain Excellence. Logistics Information Management, 8 (2):38-45.
Takon, S. M. (2013). Does Cash Conversion Cycle Have Impact on Return on Assets of Nigerian Firms? Research Journal of Finance and Accounting, 4 (14): 34-42. ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Teigen, L, E. (2001). Treasury management: An overview. Business Credit, 103 (7): 23-24.
Thisday (2011). Thisday newspeper of 28th august 2011, pp32
Warnes, S. (2013). Impact of Working Capital Management on Firm’s Profitability: Empirical Evidence from Cement Sector (A Case study of Pakistani Firms). American Journal of Governance and Politics 3 (2): 46-55. ISSN (Paper) 2568-5236 ISSN (Online) 2568-5597
Weston, J. F. and Brigham, E. F. (1979). Essential of Managerial Finance, Fifth Edition, Dryden Press, Hinsdale III.
Wongthatsanekorn, W. (2010). Study of Cash-to-Cash Cycle Management on Profitability of Private Hospital in Thailand by Regular and Panel Data Regression. Proceedings of the World Congress on Engineering and Computer Science Vol II WCECS, October 20-22, 2010, San Francisco, USA
Wongthatsanekorn and Panigrahi (2013).
Zariyawati, M. A., Annuar, M. N., Taufiq, H. and Abdul Rahim, A. S. (2009). Working Capital Management and Corporate Performance: Case of Malaysia. Journal of Modern Accounting and Auditing 5 (11): 47–54.