A comparative analysis on the impact of firm-specific characteristics and macroeconomic variables on financial performance and working capital management of listed companies in Nigeria

Abstract

This study examined the impact of firm-specific characteristics and macroeconomic variables on the financial performance and working capital management of listed companies under the consumer goods sector, the financial sector and the oil and gas sector in Nigeria. The firm-specific characteristics studied comprise firm size, leverage, operating cycle, and sales growth, while the macroeconomic variables studied include inflation rate, exchange rate, and gross domestic product. Secondary sources of data were sourced from the annual reports of the companies listed under the three selected sectors for this study for the period 2013–2022. Seven hypotheses were assessed with the use of multiple regression analysis. The study's results indicate that the operating cycle has a noteworthy negative effect on the financial performance of consumer goods companies listed in Nigeria. However, firm size, leverage, and sales growth do not have a major influence on financial performance. The results also indicated that sales growth has a favourable and substantial influence, while leverage has an unfavourable but substantial influence on the financial performance of listed financial companies in Nigeria. The size of the firm and the operating cycle do not have a statistically significant influence. Lastly, the findings indicate that the operating cycle positively and significantly affects the financial performance of listed oil and gas companies in Nigeria, whereas leverage has a negative and substantial influence. The influence of firm size and sales growth is negligible. The analytical findings indicate that the operating cycle has a notable and meaningful influence on the management of working capital in consumer goods companies listed in Nigeria. The effect of leverage and sales growth was shown to be negative and statistically significant, although company size did not have a statistically significant influence. Moreover, the results indicate that firm size has a favourable and substantial influence on the management of working capital in financial companies listed in Nigeria. Conversely, the effect of leverage is shown to be unfavourable but considerable. The influence of the operational cycle and sales growth was found to be negligible. Finally, the recorded data indicate that firm size and leverage have a negative but substantial effect on the management of working capital in listed oil and gas companies in Nigeria. Page v of 349 Conversely, the operating cycle has a positive and significant effect. The effect of sales growth was negligible. For macroeconomic variables, the study’s findings showed that gross domestic product, exchange rate, and inflation rate have no significant impact on the financial performance and working capital management of the listed companies in the consumer goods sector, the financial sector and the oil and gas sector in Nigeria. Lastly, the findings showed that firm-specific characteristics impact the financial performance and working capital management of the oil and gas sector the most, followed by the financial sector, and finally the consumer goods sector. On the other hand, macroeconomic variables do not impact the financial performance and working capital management of the three chosen sectors in Nigeria. Based on the results obtained from the study, it is recommended that companies should give priority to developing a detailed knowledge of their unique features, such as their size, debt levels, operating cycle, and sales growth. Furthermore, it is recommended that companies enhance their operating cycles by prioritising streamlined supply chain procedures, effective inventory management, and customer-focused initiatives. Additionally, policymakers should prioritise the establishment of a regulatory framework that fosters prudent and purposeful utilisation of debt within the financial sector. Regulatory frameworks may incentivize financial firms to embrace sustainable debt management techniques, therefore promoting enduring stability. Policymakers should prioritise the establishment of a secure business environment that enables companies to devise and execute efficient risk mitigation strategies. Investors are recommended to diversify their portfolios in order to mitigate risks, as they understand that firm-specific features and macroeconomic factors have different effects on various sectors. It is essential for all stakeholders to use sophisticated analytics and engage in continual monitoring and assessment of initiatives in order to adjust to the changing economic environment in Nigeria.