MODERATING EFFECT OF FIRM SIZE ON THE RELATIONSHIP BETWEEN CASH CONVERSION CYCLE AND FIRMS IN NIGERIA
Sulaiman, Abdulwahab Sulaiman, Muhammad Ibrahim Atiku and Aakoo, Baritore Gbiodum
Volume 1 Issue 1
Abstract
Management of working capital is a challenging issue for financial managers because the success or otherwise of the management of financial ratios affect firms' value. In this regard, this study examined the Moderating Effect of Firm Size on the Relationship Between Cash Conversion Cycle and Firms' Value of Listed Industrial-Goods Firms in Nigeria. Eleven (11) out of twelve (12) Industrial-goods firms listed on the Nigerian Stock Exchange for the period of 2009-2019 were considered. Data were sourced from the annual Reports/Financial statements of the sample firms. The study adopted ex-post facto research design. Regression analyses were conducted using Feasible generalized least square and Het-corrected standard errors. Primary finding revealed that cash conversion cycle has positive significant effect on Tobin's Q, but secondary finding revealed that cash conversion cycle has insignificant effect on Tobin's Q as a result of firm size moderation. In view of the findings, this study concluded that firm size do not significantly moderate cash conversion cycle. Therefore, recommends that Managers of Industrial-goods firms in Nigeria should not invest too much in non-current assets as it reduces the amount of liquidity of the firms; Similarly, Managers should reduce the number of days of converting stock to cash; Managers should equally reduce the account receivable period but increase the account payable period. Thus, the firms can be more liquid which can use for investment in other profitable portfolios that can increase the value of the firms thereby enhancing and maximizing the shareholders wealth. Keywords: Cash Conversion Cycle, Firm Size, Sales Growth, Tobin's Q
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