Empirical Analysis of the Effect of Cash Flow Management on Financial Performance of Listed Consumer Goods Firms in Nigeria
Keywords:
Cash flows, financial performance, operating cash flows, investing cash flows, financing cash flowsAbstract
Despite the importance of cash flow management in achieving financial success and sustainability, many companies continue to struggle with managing their cash flows effectively. Poor cash flow management can lead to liquidity crises, reduced profitability, and even business failure. The main objective of this study was to ascertain the effect of cash flow management on financial performance of listed consumer goods firms in Nigeria from 2014 to 2023. The research design adopted for this study was ex post facto and secondary data were used. The population of the study comprised 21 listed consumer goods firms in Nigeria, out of which 16 companies were purposively selected to constitute the sample size of the study. The data used in this study were analyzed using the Generalized Method of Moment (GMM) regression. The result of the analysis revealed that operating cashflows [coef. = 0.023 (0.000)] has significant positive effect on the return on capital employed (ROCE); investing cash flows [coef. = 0.025 (0.115)] have significant positive effect on return on capital employed; financing cash flows [coef. = 0.05 (0.024)] have significant positive effect on return on capital employed of listed consumer goods companies in Nigeria. It was thus concluded that cash flow management significantly affect the financial performance of listed consumer goods firms in Nigeria. Based on these findings, it was recommended among others that the management of consumer goods companies in Nigeria should ensure positive and healthy cash flows from core business activities as this enhance liquidity, reduce reliance on external financing, and sustain long-term profitability.
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