ACCOUNT RECEIVABLE AND INVENTORY CONVERSION MANAGEMENT AS DETERMINANTS OF CORPORATE FINANCIAL PERFORMANCE: EVIDENCE FROM PUBLICLY QUOTED NIGERIAN FIRMS

Abstract

In this study, we examined whether account receivable and inventory conversion management (ICM) serve as a determinant of corporate financial performance. Ex-post facto design was used and sample of seventy-six (76) firms across various non-financial firm’s sectors were employed. Panel data were obtained from 2011-2019; data obtained were analyzed via descriptive (mean, median, standard deviation, minimum and maximum values, kurtosis, skewness and correlation matrix), diagnostic statistics (variance inflation factor, and unit root) and inferential (fixed and random effects model and Hausman specification) statistical tool. Findings of fixed and random effect panel regression revealed that account receivable management (ARM) significantly affects return on asset (Wald Ch2 = 24.63; prob. Chi2 = 0.000 < 0.05) while relationship between inventory conversion management (ICM) significantly affects return on asset (Wald Ch2 = 9.55; prob. Chi2 = 0.0085 < 0.05). Based on the findings, it was recommended that management should enhance accounts receivable and ICM practices as it is vital to enhancing financial performance of non-financial firms. Also, management should initiate appropriate steps to maintain the level of purchasing and sales management in order to reduce losses due to poor inventory controls and to optimize efficient utilization of resource for production. This study contributes to knowledge by filling the gap in literature on the effect of account receivable, ICM and corporate financial performance in Nigeria.
 Keywords: Account receivables, Inventory management; Inventory conversion management;
 Corporate performance; Cost of capital; Return on asset; Nigerian firms
 JEL Classification: G31; M11; M10