EFFECT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE OF SOME SELECTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Working capital management is very crucial in this period of global financial turmoil. Working capital is regarded as the lifeblood and nerve of a business concern, it is therefore essential to accommodate the smooth operations of any organization, but Studies in working capital management have provided inconclusive results. The objective of this study is to examine the effect 0f Working Capital Management on Financial Performance of Selected Deposit Money Banks in Nigeria. The study covers the period of thirteen years (2007 to 2019). Data for the study were extracted from the Deposit Money Banks’ Annual Reports and Accounts. After running the Ordinary Least Square (OLS) regression, a robustness test was conducted for validity of statistical inferences; the data was empirically tested between the regressors and the regressed. The results from the analysis revealed that Working Capital Management has no significant effect on Earnings per Share (EPS) of selected Deposit Money Banks in Nigeria, but Working Capital Management has significant effect on Return on Asset (ROA) and Return of Equity (ROE) of selected Deposit Money Banks in Nigeria. In line with the above findings, the study recommended that the management should put more attention on their liquidity in order to maintain an adequate liquidity as the study has empirically proved that higher liquidity signifies more profitability; the listed Deposit Money Banks in Nigeria should try and maintain a higher quick ratio as it will have a positive effect on their profitability. Finally, the management should reduce holding too much amount of cash in current asset as it constitutes idle cash, instead the firm should invest the cash so that it could yield higher returns.