Determinants of Working Capital Requirements in Selected Quoted Companies in Nigeria

Olayinka Olufisayo Akinlo

54 citations0/0 files storedJournal of African Business

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Working Capital and Financial Performance Corporate Finance and Governance Supply Chain and Inventory Management

Abstract

In this article, the author investigates the determinants of working capital requirements of 66 firms in Nigeria using panel data for the period 1997–2007. The results suggest that sales growth, firms’ operating cycle, economic activity, size, and permanent working capital are firm specific characteristics that positively drive working capital policy. Leverage, however, is inversely related to working capital requirements. Essentially, the results imply that traditional valuation methods used to quantify the efficiency of corporate working capital policy may be suspect as increased investments in operating working capital may be necessitated by increased business uncertainties. In general, the findings suggest that some of the insights from modern finance theory are potable to Nigeria.

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References

1978Specification Tests in Econometrics 1999The determinants and implications of corporate cash holdings 2004The Cash Flow Sensitivity of Cash 1998The Determinants of Corporate Liquidity: Theory and Evidence 2003Corporate cash holdings: An empirical investigation of UK companies 2001Bank Power and Cash Holdings: Evidence from Japan 1999African Enterprise Clusters and Industrialization: Theory and Reality 1998EFFICIENCY OF WORKING CAPITAL AND CORPORATE PROFITABILITY

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