Effect of Cash Flow and Liquidity on Financial Performance of Non-Financial Firms in Nigeria
##plugins.themes.EpsilonTheme.article.main##
Endurance Omovigho Eyamu*
Felicia Ogheneotegiri Eyamu
Ochuko Benedict Emudainohwo
The focus of this study was to examine the influence of cash flow and liquidity on the operational efficiency of non-financial companies in Nigeria. Data for the research was gathered from the annual reports of twenty-two non-financial firms that are part of the Nigeria Exchange group (NGX) from 2013 to 2022. Different tests were carried out, including model specification, collinearity, and heteroskedasticity tests, to explore the data. Cross-Sectional Time-Series FGLS Regression was employed to examine the data, indicating that cash flow indicators have a substantial positive impact and an unimportant negative effect on the financial performance indicator, which is evaluated by ROA. However, the liquidity proxy has insignificant positive effects on firm performance. The research concluded that cash flow and liquidity are important indicators of the financial performance of non-financial companies listed in Nigeria. The research indicates that businesses should prioritize capital allocation strategies, efficient asset allocation, and invest in staff research and development to improve their performance. Additionally, the firms should balance capital structure (debt and equity) and improve operational efficiency in terms of cost management and revenue generations.
Abubakar, A., Dantsoho, M. A., & Sadiq, S. A. (2020). Market risk and financial performance of listed oil and gas firms In Nigeria.
Adnan, W., & Kamran, P. S. M. (2019). Impact of liquidity ratio on profitability of firm: an empirical evidence from automobile industry of Pakistan. Research Journal of Finance and Accounting, 10(22), 136–140.
Afrifa, G. A., & Tingbani, I. (2018). Working capital management, cash flow and SMEs’ performance. International Journal of Banking, Accounting and Finance, 9(1), 19–43.
Akenga, G. (2017). Effect of liquidity on financial performance of firms listed at the Nairobi Securities Exchange, Kenya. International Journal of Science and Research, 6(7), 279–285.
Alhassan, I., & Islam, K. A. (2021). Liquidity management and financial performance of listed oil and gas companies in Nigeria. International Journal of Accounting & Finance Review, 8(1), 15–25.
Appah, E., Awuji, C. E., & Anuogwo, K. N. (2021). Cash flow accounting and corporate financial performance of listed consumer goods companies in Nigeria. IOSR Journal of Business and Management (IOSR-JBM), 23(3), 18–29.
De Hoyos, R. E., & Sarafidis, V. (2006). Testing for cross-sectional dependence in panel-data models. The Stata Journal, 6(4), 482–496.
Emudainohwo, O. B. (2015). Impact of government policy, institutions and macroeconomic factors on FDI in Nigeria. Glasgow Caledonian University.
Emudainohwo, O. B., & Stephen, E. (2015). Institutional Quality Impact on Firms’ Performance and Economic Growth in Africa.
Fijabi, K., Bello, I., Lasisi, R., & Akenroye, C. (2023). Cash flow effect and financial performance of quoted oil and gas sector 2013-2022: Evidence from Nigeria.
Frank, B. P., & James, O. K. (2014). Cash flow and corporate performance: A study of selected food and beverages companies in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(7), 77–87.
Gregory, A., Tharyan, R., & Whittaker, J. (2014). Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics, 124, 633–657.
Imhanzenobe, J. O., & Adeyemi, S. B. (2020). Financial decisions and sustainable cash flows in Nigerian manufacturing companies. International Journal of Management, Economics and Social Sciences (IJMESS), 9(2), 90–112.
Kashif, M., Atique, B., Khurshid, M. K., Imran, M., & Zahid, I. (2020). Impact of Cash Flow on Firm Performance under Capital Market Imperfections: Evidence from Pakistani Listed Manufacturing Firms. International Journal of Management (IJM), 11(8), 1957–1968.
Kimondo, C. N., Irungu, M., & Obanda, M. (2016). The impact of liquidity on the financial performance of the nonfinancial firms quoted on the Nairobi Securities Exchange. Researchjournali’s Journal of Accounting, 4(2), 1–12.
Kithinji, M. M., Wephukulu, J. M., Gekara, M., & Mwanzia, M. (2023). Cash management and financial performance of public universities in Kenya. Reviewed Journal International of Business Management [ISSN 2663-127X], 4(1), 41–59.
Li, K., Musah, M., Kong, Y., Adjei Mensah, I., Antwi, S. K., Bawuah, J., Donkor, M., Coffie, C. P. K., & Andrew Osei, A. (2020). Liquidity and firms’ financial performance nexus: panel evidence from non-financial firms listed on the Ghana Stock Exchange. Sage Open, 10(3), 2158244020950363.
Liman, M., & Mohammed, A. (2018). Operating cash flow and corporate financial performance of listed conglomerate companies in Nigeria. Journal of Humanities and Social Science, 23(2), 1–11.
Mabandla, N. Z., & Makoni, P. L. (2019). Working capital management and financial performance: Evidence from listed food and beverage companies in South Africa. Academy of Accounting and Financial Studies Journal, 23(2), 1–10.
Matar, A., Al-Rdaydeh, M., Al-Shannag, F., & Odeh, M. (2018). Factors affecting the corporate performance: Panel data analysis for listed firms in Jordan. Academy of Accounting and Financial Studies Journal, 22(6), 1–10.
Musah, M., & Kong, Y. (2019). The affiliation between cash flows and the financial performance of non-financial firms: an empirical evidence from the Ghana stock exchange (GSE). EPRA International Journal of Research and Development (IJRD), 4(4), 84–92.
Musiita, B., Boyi, B., Kisaalita, T., Mutungi, W., & Mbabazize, R. (2023). Liquidity Management and Financial Performance of SACCOs in Bushenyi District.
Nangih, E., Ofor, T. N., & Ven, O. (2020). Cash Flow management and financial performance of quoted oil and gas firms in Nigeria. Journal of Accounting and Financial Management, 6(4), 1–11.
Ojode, C. A. (2014). Effect of free cash flow on profitability of firms listed on the Nairobi Securities Exchange.
Olulu-Briggs, O. V., & Wobo, H. O. (2023). Cash flow, liquidity and capital structure on profitability of quoted manufacturing firms in Nigeria. Proceedings of the 7th Annual International Academic Conference on Accounting and Finance Disruptive Technology: Accounting Practices, Financial and Sustainability Reporting Rivers State University of Science and Technology University of Port Harcourt, 1–17.
Onyemenam, C. M., Okwo, M. I., & Eze, C. U. (2023). Free Cash Flow Activities and Financial Performance of Listed Pharmaceutical Firms in Nigeria.
Oseifuah, E. K., & Gyekye, A. B. (2014). Analysis of the level of financial literacy among South African undergraduate students. Journal of Economics and Behavioral Studies, 6(3), 242–250.
Qiu, Y. (2023). Leverage, liquidity, cash flows and company performance of Chinese listed logistics companies during COVID-19 based on multiple linear regression model and data mining. Advances in Economics and Management Research, 5(1), 122.
Richards, V. D., & Laughlin, E. J. (1980). A cash conversion cycle approach to liquidity analysis. Financial Management, 32–38.
Schmidt, A. F., & Finan, C. (2018). Linear regression and the normality assumption. Journal of Clinical Epidemiology, 98, 146–151.
Suciani, T. Y., & Setyawan, S. (2022). Analysis of cash flow statement to assess the company’s financial performance at PT Astra International TBK. Cashflow: Current Advanced Research on Sharia Finance and Economic Worldwide, 1(4), 1–12.
Sulaiman, A. S., Abdu, J. B., & Khadijah, K. M. (2018). Effect of working capital management on the profitability of listed consumer goods firms in Nigeria. Ilorin Journal of Finance, 83.
Wan, P., He, F., & Zhang, H. (2024). Can the separation of marketing authorization from manufacturing authorization stimulate pharmaceutical innovation? Evidence from China’s pharmaceutical industry reform. Economic Analysis and Policy, 83, 734–748.
Zalaghi, H., Godini, M., & Mansouri, K. (2019). The moderating role of firms characteristics on the relationship between working capital management and financial performance. Advances in Mathematical Finance and Applications, 4(1), 71–88.
