Empirical Evaluation of Current Assets Investment and Corporate Financial Returns in Nigeria
Osirim, Monday
Department of Accounting, Ignatius Ajuru University of Education, Rumuolumeni, Port Harcourt, Nigeria.
Moses, Temple *
Department of Accounting, University of Port Harcourt, Port Harcourt, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
The unceasing apprehension of probable distress of commercial banks in Nigeria has raised concerns on the quality of current assets investment and management in the Nigerian banking industry. Hence, the study analyzed the impact of current assets investment & management on corporate financial returns of listed commercial banks in Nigeria. The longitudinal research design was adopted and secondary data of eight (8) banks whose annual reports were available as at the end of 2016 was randomly selected from the population of fifteen (15) listed deposit money banks in the Nigerian Stock Exchange. Ordinary least square (OLS) regression analysis was employed to determine the association between current assets investment and corporate financial returns. The results of the study indicate that there exist a significant positive relationship between loans and advances granted to customers and return on assets (r =.443, p-value =.004). This leads to the rejection of the null hypothesis, which states that loans and advances granted to customers have no positive influence on return on assets. The relationship between loans and advances granted to other banks and return on assets is negative and significant at 5% confidence level (r = .369, p-value =.019).This leads to the non-rejection of the null hypothesis, which states that loans and advances granted to other banks have no positive impact on returns on assets. The other predictor variables (financial assets held for trading & cash, and cash balances) have an insignificant positive relationships with return on assets. It was therefore recommended that bank managers should not only increase their investment in current assets but they should also consider the most effective and efficient way of managing these assets in order to improve their financial efficiency and corporate value. To this end, the conservative or aggressive current assets investments policy might be pursued depending on the strategic focus of the firm.
Keywords: Financial instruments, financial assets, returns on assets, current assets, corporate returns, financial returns