Credit management and firm performance: Evidenced from the consumer goods sector in Nigeria

Abstract

Inefficient credit management can threaten firms' profitability and existence as a going concern, and consumer goods firms operating in an unstable and unfriendly business environment are more vulnerable to any laxity in credit management because consumer goods firms have considerable investments in account payables and receivables. This study examined the impact of credit management on the performance of the consumer goods sector in Nigeria. The ex-post-facto research design was used for the study, and data were obtained from the financial statement of Thirteen quoted firms in the consumer goods sector from 2011 to 2020. The study conducted descriptive analysis, Pearson's Correlation, and panel ordinary least square estimation on the variables. At the same time, the Hausman test was carried out to choose the correct model for the study. The fixed-effect model was chosen, and the result revealed that the average collection period and Account payable period significantly impact the profitability of Consumer goods firms in Nigeria. The study showed that effective credit management significantly impacts the profitability of consumer goods firms in Nigeria. The study recommended that firm managers of consumer goods firms in Nigeria should implement a liberal credit management policy to improve their profitability, and the service of factoring companies can be employed to prevent the incidence of bad debt which could arise from the liberal credit management policy.