WORKING CAPITAL MANAGEMENT, PROFITABILITY AND FIRM VALUE OF LISTED MANUFACTURING COMPANIES IN NIGERIA
Keywords:
Working Capital, Cash Conversion Cycle, Return on Equity, Price–Earnings Ratio, Manufacturing FirmsAbstract
This study investigates the effect of working capital management on profitability and firm value of listed manufacturing companies in Nigeria. Recognizing the critical role of short-term financial efficiency in enhancing shareholder returns and market valuation, the research focuses on cash conversion cycle (CCC) as proxy for working capital management, while return on equity (ROE) and price–earnings ratio (PER) serves as measures of profitability and firm value, respectively. Employing an ex-post facto research design, the study utilizes secondary panel data from 15 purposively selected manufacturing firms listed on the Nigerian Exchange Group (NGX) over the period 2015–2024. Descriptive statistics, correlation analysis, unit root tests, and panel regression techniques are applied to analyze the relationships. The findings reveal that a shorter and efficiently managed cash conversion cycle significantly enhances both ROE and PER, confirming that optimal liquidity management improves operational efficiency, reduces financing costs, and signals financial stability to investors. These results align with the Liquidity–Profitability Trade-Off Theory and Shareholder Value Maximization Theory, emphasizing the strategic importance of balancing liquidity and profitability to maximize shareholder wealth. The study recommends that manufacturing firms adopt proactive working capital policies to strengthen profitability and integrate operational-financial coordination to enhance market valuation. Policymakers and investors are also guided to recognize working capital efficiency as a key indicator of firm performance and investment potential.References
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