EFFECT OF CASH HOLDINGS ON FINANCIAL PERFORMANCE OF QUOTED MANUFACTURING COMPANIES IN NIGERIA

Abstract

The study examined the effect of cash holdings on financial performance of quoted manufacturing companies in Nigeria. The population of the study consisted of 21 consumer goods firms quoted on the Nigerian Stock Exchange as at 31st December, 2018. The study relied on secondary data sourced from the annual reports of the quoted consumer goods firms. Descriptive statistics was done using Statistical Package for Social Sciences (SPSS). Multiple regression analysis was employed in hypotheses testing. The study finds a strong negative relationship between cash to book value of assets and net profit margin. Cash to book value of assets has no significant effect on net profit margin (NPM) (p<0.5); There is no significant effect of cash to book value of asset on gross profit margin (GPM) (p<0.5); There is no significant influence of cash to book value of asset on Tobin’s Q (p<0.5). The​ study recommended that management should set proper exit strategies (contingency plan) for a high conservative cash management; firms should set a time horizon to encourage them to return to direct financing and optimization of cash holding reserves should also be encouraged.