Current Assets Management and Financial Performance: Evidence from Listed Deposit Money Banks in Nigeria

Abstract

The concepts of current assets management and financial performance have been adopted in many research fields but they are scarcely attempted on in developing countries. The structure and size of current assets and its impact on the financial performance of the firm cannot be over-emphasised. A literature gap exists, thus motivating the author to come up with a multiple correlation and regression model that uses current assets management to forecast changes in financial performance of deposit money banks in Nigeria. These varying parameters include the cash and bank balances, financial assets held for trading, derivative assets, loans and advances to banks and loans and advances to customers. An OLS model was formulated to compute the effect of CAM on financial performance. For model validation purpose, five year data analysis was conducted. The study’s sample utilizes data from 2010-2014 belonging to 15 deposit money banks operating in financial services sector as listed by the Nigerian Stock Exchange (NSE). In empirical analyses, robust estimator was used. The results of the conducted analyses suggest a positive relation between the cash and bank balances, financial assets held for trading, loans and advances to customers and Return on Asset. Another result of the study, on the other hand, suggests that derivative assets, loans and advances to banks have negative impact on return on asset.

Keywords: Current assets management, deposit money banks, financial performance, Nigeria