economic value added Archives - EA Journals
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Liquidity Management and Corporate Sustainability of listed Oil and Gas Companies: Empirical Evidence from Nigeria (Published)
Article Author: Folajimi Festus Adegbie and Timilehin Aesanmi
Investors had watched the fragile state of corporate sustainability of the oil and gas companies, as huge capital investments had been lost due to the unpredictable nature of prices occasioned by the unstable foreign exchange rate. Studies have shown that profitability, assets growth and economic value added expectations of investors rely on skillful and efficient management of the companies’ resources especially, liquidity management, which were considered inadequate. Consequently, the study investigated the effect of liquidity management on corporate sustainability of the oil and gas companies in Nigeria.The study explored ex-post facto research design. The population consisted of 13 listed oil and gas companies listed on the Nigerian Stock Exchange as at 31st December 2017. Ten oil and gas companies were selected using purposive sampling technique. Data were extracted from published financial statements of the sampled companies, while the validity and reliability of the data were premised on the scrutiny and certification by the external auditors. Descriptive statistics and inferential statistics were used for the data analysis.The study revealed that corporate sustainability of quoted oil and gas companies in Nigerian was significantly affected by liquidity management. Results showed that liquidity management had a positive significant effect on profitability, F-Statistics (4, 95) = 3.493; AdjR2 = 0.092; P-value = 0.010; while liquidity management also exhibited a positive significant effect on assets growth, F-Statistics (4, 95) = 0.3.030; AdjR2 = 0.076; P-value= 0.021. Also, liquidity management exhibited a positive significant impact on economic value added. F-Statistics (4, 95) = 2.598; AdjR2 = 0.054; P-value = 0.035. When the control variable was introduced, the results revealed that liquidity management had a positive significant effect on profitability, F-Statistics (5, 94) = 3.020; AdjR2 = 0.093; P-value = 0.014; while liquidity management also exhibited a positive significant effect on assets growth, F-Statistics (5, 94) = 2.488; AdjR2 = 0.070; P-value= 0.037. Also, liquidity management exhibited a positive significant impact on economic value added. F-Statistics (5, 94) = 4.683; AdjR2 = 0.159; P-value = 0.001.The study concluded that liquidity management affected corporate sustainability of quoted oil and gas companies in Nigerian. The study recommended that shareholders, managers, policy makers, financial regulators and market participants should be mindful of companies’ liquidity management and time lag between credit sales and collection of receivables as critical to the corporate sustainability companies. Managers should revisit cash conversion cycle policy time-lag, and ensure effective resource management because of their importance to corporate sustainability.
Keywords: Liquidity Management, Quick Ratio, assets growth, cash conversion, corporate sustainability, economic value added
Financial Risk and Financial Performance of Deposit Money Banks Listed in Nigeria (Published)
Article Author: Olaoye, Samuel Adebayo ,Ogbebor, Peter Ifeanyi ,Okusami, Yusuf Abiodun
This study examined the effect of financial risks on performance of Deposit Money Banks DMBs) using the identified explanatory variables of financial risks, viz: Credit risks, Insolvency risks, Liquidity risks and Market risks covering a period of 12 years (2007- 2018). The methodology of the study makes use of ex-post facto research design. While the population of the study were nineteen deposit money banks, the study sample comprised ten (10) DMBs. The panel regression models estimated using Unobserved Effects Model (UEM), while the result of the Hausman test indicated between fixed effect model and random effect model at 5% inference. The study findings showed that Credit Risk was negative and statistically significant to deposit money banks’ performance [β = – 13.0495; Pval = 0.013]. The result also shows that Liquidity Risk is inversely and insignificantly related to banks’ profitability [β = – 0.156; Pval = 0.6703] and Insolvency Risk (INSRK) have negative signs that are statistically insignificant to banks profitability [β = – 0.016; Pval = 0.745]. Market Risk has insignificant and positive effect on Profitability (NPBIT) [β = 0.038; Pval = 0.5720] at 0.05 level. Also, Credit Risk (CR) was found to be negative and statistically significant at Economic Value Added [β = – 7.0789; Pval = 0.006]. On the contrary, the result also shows that Liquidity Risk (LIQR) [β = 0.0264; Pval = 0.961] and Market Risk [β = 0.0369; Pval = 0.747] have positive signs that are statistically insignificant to Economic Value Added. On its part, Credit Risk (CR) established a negative and significant effect on Return on Assets [β = – 0.9647; Pval = 0.0421]. Liquidity Risk [β = – 0.0018; Pval = 0.8471] and Insolvency Risk [β = 0.0008; Pval = 0.7719] have negative and positive signs that are statistically insignificant to Return on Assets. In relation to the findings of the study, the study recommended amongst others that it is fundamental for DMBs in Nigeria to practice scientific credit risk management, improve their efficacy in credit analysis and loan management to secure as much as possible their assets, and minimize the high incidence of non-performing loans and their negative effects on financial performance
Keywords: Credit risk, Market Risk, Profitability, economic value added, financial risk, insolvency risk