ABSTRACT
Effective corporate governance practices in an organization guaranteed that its resources are managed in a manner that will lead to a better performance. The management of working capital is such a resource that effective corporate governance has an effect since when a business does not manage its liquidity well; it will have cash shortages and as a result experience problems paying its obligations when they fall due. Towards this end, the research pursued to examines the impact of Corporate Governance mechanisms on Working Capital Management of listed conglomerate Companies in Nigeria over the period 2004-2013. Samples of five firms out of six conglomerate companies listed on the floor of Nigerian Stock Exchange were studied. The study made use of secondary data generated from Annual Reports and Accounts of the sampled firms and the Nigerian Stock Exchange Fact book. The data was analyzed by means of descriptive statistics, correlation and regression analysis using STATA package.A Panel Data Technique was employed since the data has both time series and cross sectional characteristics, therefore, pooled OLS, fixed effect and random effect were applied to estimate the models. It is revealed by the findings of the study thatboard size and board composition have significant positive impact on Cash Conversion Cycle while Audit Committee Size showed a negative and insignificant impact on Cash Conversion Cycle. The study concluded that corporate governance mechanisms play important role in improving the efficiency of working capital management. It is recommended that optimum board size is necessary for effective management of working capital; the board composition should composeof more non-executive and independent directors for effective monitoring of working capital management. Also, the Audit Committee Sizeshouldbe composed ofmaximum members of six as required by CAMA’90 and shall consist of equal number of directors and representatives of the shareholders of the company, because of the inverse relationship that exists with the working capital management efficiency.
TABLE OF CONTENT
DECLARATION ................................................................................................................. i
CERTIFICATION .............................................................................................................. ii
APPROVAL ...................................................................................................................... iii ACKNOWLEDGEMENTS............................................................................................... iv DEDICATION................................................................................................................... vi
LIST OF TABLES............................................................................................................ xii
Abstract .
CHAPTER ONE: INTRODUCTION
1.1Background to the Study............................................................................................ 1
1.2 Statement of Research Problem ................................................................................ 5
1.3 Objectives of the Study............................................................................................. 8
1.4 Hypotheses of the Study ........................................................................................... 8
1. 5 Scope of the Study ................................................................................................... 9
1.6 Significance of the Study
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction............................................................................................................. 11
2.2 The Concept of Corporate Governance .................................................................. 11
2.2.1 Elements of Corporate Governance ..................................................................... 13
2.2.2 Corporate Governance in Nigeria ........................................................................ 17
2.3 The Concept of Working Capital Management ...................................................... 19
2.3.1 Working Capital Management Variables............................................................. 21
2.3.2 Financing Working Capital.................................................................................. 24
2.3.3 Approaches to Financing Working Capital
2.3.4 Working Capital Management Efficiency (WCME) ........................................... 28
2.4 Corporate Governance Mechanism and Working Capital Management ................ 29
2.5 Empirical Review on Corporate Governance and Working Capital Management Efficiency...................................................................................................................... 31
2.5.1 Corporate Governance and Accounts Receivable Management.......................... 38
2.5.2 Corporate Governance and Accounts Payable Management............................... 40
2.5.3 Corporate Governance and Inventory Management ............................................ 41
2.5.4 Corporate governance and Cash Conversion Cycle............................................. 41
2.6 Theoretical framework
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction............................................................................................................. 47
3.2 Research Design...................................................................................................... 47
3.3 Population of the Study........................................................................................... 47
3.4 Sample Size............................................................................................................. 48
3.5 Source and Method of Data Collection................................................................... 49
3.6 The Variables of the Study and their Measurement................................................ 49
3.6.1 The Dependent Variables..................................................................................... 49
3.6.2 The Explanatory Variables .................................................................................. 49
3.7 Technique for Data Analysis .................................................................................. 51
3.7.1 Descriptive Statistics............................................................................................ 51
3.7.2 Pearson Correlation.............................................................................................. 52
3.7.3 Multiple Regression ............................................................................................. 52
3.8 Model Specification .......................................................................................... 53
3.9 Robustness Test of Independent and Dependent Variables
CHAPTER FOUR: RESULTS AND DISCUSSION
4.1 Introduction............................................................................................................. 56
4.2 Tests for Model Validation and Fitness .................................................................. 56
4.2.1 Normality Test ..................................................................................................... 56
4.2.2 Heteroskedasticity Test........................................................................................ 57
4.2.3 Multicollinearity Test........................................................................................... 57
4.3 Results and Discussion ........................................................................................... 58
4.3.1 Descriptive Statistics Result ................................................................................ 58
4.3.2 Correlation Result ................................................................................................ 60
4.3.3 Regression Results ............................................................................................... 63
4.4 Summary of Finding ............................................................................................... 76
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction............................................................................................................. 78
5.2 Summary ................................................................................................................. 78
5.3 Conclusions............................................................................................................. 81
5.4 Recommendations................................................................................................... 82
5.5 Suggestions for Further Research ........................................................................... 83
References......................................................................................................................... 84
APPENDICES .................................................................................................................. 92
Appendix A................................................................................................................... 92
Normal Probability Plot: Stata Version 12.0 Generated Results .............................. 92
Appendix B ................................................................................................................... 92
Descriptive and Correlation: Stata Version 12.0 Generated Results ........................ 92
Correlation Matrix (ARP) ......................................................................................... 93
Correlation Matrix (APP) ......................................................................................... 93
Correlation Matrix (ICP)........................................................................................... 93
Correlation Matrix (CCC)......................................................................................... 93
Appendix C ................................................................................................................... 94
Regression results ARP and Independent variables: Stata Version 12.0
Generated Results....................................................................................................................... 94
OLS Regression ........................................................................................................ 94
Test for Heteroskedasticity ....................................................................................... 94
OLS Rebust Regression (ARP)................................................................................. 94
Test for Multicollineality .......................................................................................... 95
Random Effect Regression Result(ARP).................................................................. 95
Fixed effect Regression Result (ARP)...................................................................... 95
Hausman Fixed Effect Test....................................................................................... 96
Appendix D................................................................................................................... 96
Regression Results APP and Independent Variables: Stata Version 12.0
Generated Results....................................................................................................................... 96
OLS Regression ........................................................................................................ 96
Test for Heteroskedasticity ....................................................................................... 97
OLS Robust Regression (APP)................................................................................. 97
Random Effect Regression Result (APP) ................................................................. 97
Fixed Effect Regression Result (APP)...................................................................... 98
Hausman Fixed Random Test................................................................................... 98
Appendix E ................................................................................................................... 99
Regression Results ICP and Independent Variables: Stata Version 12.0
Generated Results....................................................................................................................... 99
OLS Regression (ICP) .............................................................................................. 99
Test for Heteroskedasticity (ICP) ............................................................................. 99
Random Effect Regression Result (ICP) .................................................................. 99
Fixed Effect Regression Result (ICP)..................................................................... 100
Hausman Fixed Effect Test..................................................................................... 100
Appendix F.................................................................................................................. 101
Regression Results CCC and Independent Variables: Stata Version 12.0
Generated Result ...................................................................................................................... 101
OLS Regression CCC ............................................................................................. 101
Test for Heteroskedasticity ..................................................................................... 101
Random Effect Regression Result (CCC)............................................................... 101
Fixed Effect Regression Results (CCC) ................................................................. 102
Hausman Fixed Effect Test..................................................................................... 102
Appendix G................................................................................................................. 103 x
Multivariate Regression Result................................................................................... 103
Appendix H................................................................................................................. 103
Listed Nigerian Conglomerate Companies Data Sheet .............................................. 103
LIST OF TABLES
Table 3.1: Population of the study 48
Table 3.2: Sample size 48
Table 3.3: Proxy Variables and Variable Measurement 51
Table 4.1: Descriptive Statistics result 59
Table 4.2: Correlation between ARP and Independent Variables 60
Table 4.3: Correlation between APP and Independent Variables 61
Table 4.4: Correlation between ICP and Independent Variables 62
Table 4.5: Correlation between CCC and Independent Variables 63
Table 4.6: Regression Result on ARP and Independent Variables 65
Table 4.7: Regression Result on APP and Independent Variables 68
Table 4.8: Regression Result on ICP and Independent Variables 71
Table 4.9: Regression Result on CCC and Independent Variables 74
Mohammed, B (2021). THE IMPACT OF CORPORATE GOVERNANCE MECHANISMS ON WORKING CAPITAL MANAGEMENT OF LISTED CONGLOMERATE COMPANIES IN NIGERIA. Afribary. Retrieved from https://afribary.com/works/the-impact-of-corporate-governance-mechanisms-on-working-capital-management-of-listed-conglomerate-companies-in-nigeria
Mohammed, Bahamman "THE IMPACT OF CORPORATE GOVERNANCE MECHANISMS ON WORKING CAPITAL MANAGEMENT OF LISTED CONGLOMERATE COMPANIES IN NIGERIA" Afribary. Afribary, 21 Feb. 2021, https://afribary.com/works/the-impact-of-corporate-governance-mechanisms-on-working-capital-management-of-listed-conglomerate-companies-in-nigeria. Accessed 19 Apr. 2024.
Mohammed, Bahamman . "THE IMPACT OF CORPORATE GOVERNANCE MECHANISMS ON WORKING CAPITAL MANAGEMENT OF LISTED CONGLOMERATE COMPANIES IN NIGERIA". Afribary, Afribary, 21 Feb. 2021. Web. 19 Apr. 2024. < https://afribary.com/works/the-impact-of-corporate-governance-mechanisms-on-working-capital-management-of-listed-conglomerate-companies-in-nigeria >.
Mohammed, Bahamman . "THE IMPACT OF CORPORATE GOVERNANCE MECHANISMS ON WORKING CAPITAL MANAGEMENT OF LISTED CONGLOMERATE COMPANIES IN NIGERIA" Afribary (2021). Accessed April 19, 2024. https://afribary.com/works/the-impact-of-corporate-governance-mechanisms-on-working-capital-management-of-listed-conglomerate-companies-in-nigeria