CASH MANAGEMENT PRACTICES AND MARKET VALUE OF LISTEDPHARMACEUTICAL FIRMS IN NIGERIA

Abstract

Poor cash management exposes businesses to illiquidity and insufficiency, hindering the ability to meet
daily liquidity requirements. In view of this, the study examined the relationship between cash management
practices and market value of listed pharmaceutical firms in Nigeria. The specific objectives were to
determine the relationship between cash conversion cycle and market capitalization of listed
pharmaceutical firms in Nigeria, to ascertain the relationship between current ratio and market
capitalization of listed pharmaceutical firms in Nigeria and to assess the relationship between of cash ratio
and market capitalization of listed pharmaceutical firms in Nigeria. The study adopted an ex-post facto
research design and utilized a panel data of seventy (70) pooled observations gathered from seven (7) listed
pharmaceutical firms in Nigeria over ten (10)-year period (2014-2023) and employed a panel multiple
regression technique to analyze the data via E-views 10.0 statistical package. The study findings revealed
that cash conversion cycle has a non-significant positive relationship (Coeff. = 0.003378 {0.8406}) with
the market capitalization of listed pharmaceutical firms in Nigeria while operating cashflow has a
significant positive relationship (Coeff. = 0.258792 {0.0469}) with the market capitalization of listed
pharmaceutical firms in Nigeria. It also revealed that cash ratio has a significant positive relationship
(Coeff. = 2.741821 {0.0007}) with market capitalization of listed pharmaceutical firms in Nigeria. It was
however concluded that effective cash management practices, particularly cash ratio enhances the market
value of pharmaceutical firms in Nigeria. The recommendations made included that should focus on
optimizing their working capital management practices to reduce their cash conversion cycle at all times.