CASH MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The process of managing cash has become a major challenge for deposit money banks due to its significant impact in making cash available for societal use. The success of any business venture is predicted on how the management plan and control its cash-flow. This study investigated the relationship between cash management practices and financial performance of listed deposit money banks in Nigeria between 2014 and 2020. The study sought to investigate the relationship between cash and bank balances and return on equity, investigate the relationship between cash conversion cycle and return on equity, investigate the relationship between cash turnover and return on equity and finally, investigate the extent firms size moderate the relationship between cash management practices and financial performance of listed deposit money banks in Nigeria. Four hypotheses guided the study. The study was an ex-post facto research design. The population of the study was twenty-three listed deposit money banks in the Nigeria Exchange Group. Five of the banks were selected using purposive sampling technique. The data used in this study were sourced from annual reports and statement of accounts of the selected deposit money banks.  Cash and banks balances, cash conversion cycle and cash turnover were employed as the independent variables while return on equity was employed as the dependent variable. Firm size was adopted as moderating variable. Descriptive statistics and ordinary least Square regression were employed in analyzing the data. The study found that, there is a positive and significant relationship between cash and banks balances and return on equity; there is a negative but significant relationship between cash conversion cycle and return on equity; there is a positive and significant relationship between cash turnover and return on equity and finally, firm size had positive and significant moderating influence on the relationship between cash management practices and financial performance. Based on the foregoing, the study concludes that there is a positive and significant relationship between cash management practices and financial performance of listed deposit money banks in Nigeria. The study recommended among others, that deposit money bank should avoid cash and banks balances lose rather than maintaining brought-forward cash balances for equity distribution. Furthermore, firms should monitor cash conversion cycle moment for shareholders wealth creation.