WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE NEXUS: EVIDENCE FROM AFRICAN MANUFACTURING COMPANIES
The study examined the effect of working capital management on the financial performance of listed manufacturing companies in selected African countries for the period of years 2014–2019. The selected countries are Botswana, Ghana, Kenya, Nigeria, South Africa and Zambia. Nine, thirteen, nineteen, fifty-eight, nine and ten were selected for Botswana, Ghana, Kenya, Nigeria, South Africa and Zambia respectively. The study used secondary data which was analysized with the use of descriptive and regression analysis (panel fully modified ordinary least square methods). The finding shows that working capital management (WCM) practice varies across selected countries. It also discovered that account receivables period had positive effect with return on equity (ROE) in Botswana and Nigeria while it has positive effect on ROE in Ghana, Kenya, South Africa and Zambia. Account payment period has positive effect in five out of six selected African countries on ROE expect for South Africa which has negative. Inventory management has negative effect in four of the six selected African countries on ROE expect for Kenya and Zambia which has negative effect. Cash conversion cycle has positive effect in five out of six selected African countries on ROE expect for Nigeria which has negative effect. The paper recommended that emphasis should to be placed on the particular component of working capital (that is cash conversion cycle, inventory management, account receivables period and account payment period) as it effects on financial performance measured with ROE in respective countries.
Account Receivables Period; Account Payment Period; Inventory Management; Cash Conversion Cycle; Return on equity