Liquidity Management and Financial Performance of Selected Insurance Companies in Nigeria

Financial performance of an organization is one of the major concerns of any business venture because without financial performance, organizations cannot survive especially in a decentralized system and the going concern is not guaranteed. The importance of liquidity management as it affects corporate financial performance in today’s business cannot be overemphasized. The crucial part of managing working capital is required maintaining its liquidity in day-to-day operation to ensure its smooth running and meets its obligation. Liquidity and financial performance of a firm are considered both important characteristics of a firm.

The study adopted an ex-post facto within panel data framework. The population of this study of twenty listed insurance companies over a period of ten (10) years. The data used in the study were extracted from the financial statements of the listed insurance companies in Nigeria, while panel method of regression analysis was used to investigate the effects between liquidity management and financial performance.

In the findings, Cash ratio had a negative effect and statistically significant at 5% level, Quick ratio had a positive effect but not statistically significant at 5% level, Liquid asset to total asset had a negative effect but not statistically significant at 5% level. Cash ratio had a positive effect but not statistically significant at 5% level, Quick ratio had a negative effect and statistically significant at 5% level. Liquidity management and earning per share verified that Current ratio showed a positive effect and statistically significant effect on EPS.

The study recommended that insurance companies should place more priority on their equity capital which is having negative impact on their performance rather than liquidity management since they are less involved with liquid cash unlike commercial banks.

Keywords: Liquidity Management, Financial Performance, Net Profit Margin, Earnings per Share, Current Ratio, Cash Ratio, Quick Ratio, Liquid Asset to Total Asset