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Cash conversion cycle and profitability of Nigerian small and medium-sized entities: an empirical analysis
Tsagem, Musa Muhammad1, Norhani Aripin2, Rokiah Ishak3.
The aim of this study was to investigate
the relationship between cash conversion
cycle and firm performance of small
and medium-sized entities (SMEs)
in Nigeria. SMEs are potentials for
Nigerian economy growth; contributing
to gross domestic product, employment
generation, poverty reduction and
industrialization. The study employed
the panel data regression analysis using
financial data from a sample of 311
Nigerian SMEs for the period 2007-
2013. The findings of the study revealed
a negative association between cash
conversion cycle, inventory holding
period and accounts payable period with
SMEs profitability; and a statistically
significant negative relationship between
accounts receivable period and SMEs’
profitability. The findings also found a
significant positive relationship between
firm size, leverage, growth opportunities
and firm age and SMEs’ profitability.
Thus, the result of the study indicates
that Nigerian SMEs with a shorter
cash conversion cycle and low growth opportunities hold more cash. This study
contributes to existing literature on the
relationship between cash conversion
cycle and SMEs’ profitability in
developing economies. However, this
study is limited to non-financial and
non-service SMEs.
Affiliation:
- Federal College of Education, Nigeria
- Universiti Utara Malaysia, Malaysia
- Universiti Utara Malaysia, Malaysia
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