Determinants of Accounts Receivable of Listed Consumer Goods Companies in Nigeria

Abstract

The management of accounts receivable is usually done not just to reduce inventory, improve sales and profitability, but also to improve liquidity and short-term solvency. These and other factors affect the level of accounts receivable in different ways depending on the industry's nature. This study examines the determinants of accounts receivable in consumer goods manufacturing companies listed on the stock exchange in Nigeria. The study population consists of 14 consumer goods companies listed on the Nigerian stock exchange as of November, 2020. It is a longitudinal study using expost facto research design. Census sampling method was used to consider all listed consumer goods manufacturing companies. Data were collected from 2014 to 2019 annual reports of the 14 companies. Accounts for these years were prepared to comply with the International Financial Reporting Standards (IFRS). The dependent variable is accounts receivable represented by the Receivables Collection Period. Firm size, profitability, inventory, liquidity, leverage and age of companies are independent variables. The study used panel data analysis with its various elements of Pool, Fixed and Random effects. Robustness tests conducted include Variance Inflation Factor (VIF) Test, Hausman test, Lagrange Multiplier test. The result shows profitability and age has significant impact on accounts receivable. Firm size, inventory, liquidity and leverage have no significant impact on Receivable Collection Period. This suggests that profitability and age of companies have significant impact on receivables of consumer goods manufacturing companies in Nigeria. This implies that key determinants of account receivable in these companies are the quest to make profit. It also suggests that older firms know their customers better and might have vast experience in handling accounts receivable.