EFFECT OF INVENTORY TURNOVER ON INVESTORS’ DECISIONS OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

The study investigated the effect of inventory turnover on investors’ decision of listed manufacturing firms in Nigeria for the periods of 2010 to 2021. Inventory turnover is measured with cash conversion cycle, current ratio and quick ratio while investors’ decision is measured with volume of shares traded. The study made use of ex post facto research design. The population consists of forty-three (43) listed manufacturing firms in the Nigerian Exchange Group (NEG) as at December 2021. Using filtering sampling technique, the sample size of this study is made up of thirty-nine (39) manufacturing firms that have been consistently listed on the Nigerian Exchange Group and have published their financial reports within the periods under review. Panel multiple regression technique was employed as the technique of data analysis. The regression result revealed that cash conversion cycle has negative significant effect on investors’ decision of listed manufacturing firms in Nigeria while current ratio and quick ratio has positive insignificant effect on investors’ decision of listed manufacturing firms in Nigeria. Consequently, it concludes that manufacturing companies with more efficient inventory management, as reflected in a shorter cash conversion cycle, tend to attract a higher level of investor interest and trading activity in their shares. A shorter cash conversion cycle may be a driver of investor attraction, potentially leading to a higher demand for the company's shares. This can result in increased liquidity and potentially higher share prices. The study recommends that manufacturing companies should focus on optimizing their inventory management, particularly by reducing the time it takes to convert inventory and accounts receivable into cash. This can be achieved through improved inventory turnover, faster collections of accounts receivable, and efficient payables management.