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

Abstract

This study assessed the effect of working capital management on financial performance of deposit money banks listed in the Nigerian Stock Exchange for a period of five (5) years from 2018 to 2021. The total population was twenty-seven (27) banks, and ample size of ten (10) banks was simply and randomly selected from the population. The data for the study were collected from annual reports and accounts of the banks and were analysed using descriptive statistics, correlation coefficient and multiple regressions using STATA software version 14.00. The study revealed that working capital management has significant effect on financial performance of deposit money banks in Nigeria. Specifically, it discovered that return on assets, capital adequacy ratio, and cash conversion circle have significant effect on financial performance of listed deposit money banks in Nigeria, but net working capital has not significantly affected financial performance of deposit money banks in Nigeria. The study recommends that deposit money banks should optimize return on assets by continuing to focus lending and investments towards their highest risk-adjusted per-forming options, maintaining adequate regulatory capital levels and active monitoring and optimizing of cash conversion cycle by improving receivables collection periods and stretching payables without affecting operations. It equally recommends that hence no evidence that simply minimizing net working capital needs boosts profitability, banks should pursue efficiencies to balance prudence and flexibility based on the Nigeria operating environment.