Liquidity Management and Corporate Profitability: Evidence from Nigerian Listed Consumer Goods Companies

Abstract

This study investigates how liquidity management helps Nigerian listed consumer goods companies to increase their profitability to the benefit of shareholders. The study uses secondary data from the Audited Annual Accounts and Report of the fourteen sampled out of the twenty listed consumer goods companies on the floor of the Nigerian Stock Exchange for the period of eight years from 2012 to 2019. The samples were based on data availability and must have not been delisted for the period under study. Panel data regression in STATA was used for the analysis. Three regressions were carried out and the result indicates that liquidity management has the ability to increase the profitability of listed consumer goods companies in Nigeria by about 58%. Hence, for every ₦100 investment in liquidity and was properly manage; the companies might generate a profit ₦11.4 as reveals by a mean 0.11. Moreover, despite the fact that the consumer goods companies do not maintain the default liquidity position, the maximum and minimum value of 2.837 and .074, the sampled companies’ current assets outweigh their current liabilities. Thus, the study recommends the need for the consumer goods companies in Nigeria to ensure effective and efficient inventory management system that will help them to overcome stock-out problem. Moreover, monitoring mechanism should also be in place to ensure credit sales are given to creditworthy customers, with good credit rate. While, government can help the companies through lower cost of capital and import duties to help them in increase profitability.