Determinants of Working Capital Management: Case of Nigerian Manufacturing Firms

Abstract

This study explored the factors determining the working capitalwith the view to providing information on empirical tests that constitutes the determinants of working capital management in the listed manufacturing firms in Nigeria.

The study used secondary data sources which were collected from the Annual Report and Accounts of sixty purposively selected non-financial quoted companies in the Nigerian Stock Exchange Fact book. Data on financial variables such as sales, purchases, inventory, creditors, debtors and total assets were extracted from the Annual Reports of these non-financial quoted companies between the periods 2000-2009. This was when the country started to experience financial policies for the banking sector under the democratic dispensation. Macroeconomic data on the annual growth rate of the Gross Domestic Product was obtained from the Statistical Bulletin of the Central Bank of Nigeria. Data collected were analyzed using descriptive and inferential statistics.

The results showed that the significant factors determining working capital included sales growth, size of the firm, gross domestic product, leverage. The proportion of fixed assets to total assets and the net trading cycle, also determined working capital but were not significant at the five percent level.

Keywords: working capital management, purposive, non-financial quoted companies, financial policies, democratic dispensation.