Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 106

Full Length Research Paper

Operational efficiency and financial sustainability of listed manufacturing companies in Nigeria

Imhanzenobe Japhet Osazefua
  • Imhanzenobe Japhet Osazefua
  • Department of Accounting, School of Management and Social Sciences, Pan-Atlantic University, Lagos, Nigeria.
  • Google Scholar

  •  Received: 04 December 2018
  •  Accepted: 14 January 2019
  •  Published: 31 January 2019


This study investigates the impact of operational efficiency on the financial sustainability of listed manufacturing companies in Nigeria. The recent economic crisis in Nigeria has caused an alarming decline in financial sustainability indicators of manufacturing companies. Managers are forced to make efficient use of resources to maximize profitability so as to cope with and compete in the harsh economic condition. Several measures of efficiency were analysed in relation to financial sustainability. There is a dearth of studies on effect of operational efficiency on long-term profitability in Nigerian manufacturing sector. Also, stock market performance has been ignored by studies in Nigeria. This study helps to fill these gaps by evaluating the impact of operational efficiency on long-term profitability (return on asset) and stock market performance (Tobin’s Q). The efficiency variables considered include; employee growth, operating expenses, account receivables turnover, inventory turnover and asset turnover. A secondary panel dataset ranging from 2009 to 2016 for 16 listed manufacturing companies was obtained from the Bloomberg portal. The Ordinary Least Square method was used to test the 5 formulated hypotheses. The findings revealed that in relation to ROA, operating expenses and asset turnover had negative and positive significant relationship respectively. Employees’ growth, account receivable turnover and inventory turnover were found to be insignificant. In relation to Tobin’s q, both inventory and asset turnover had a positive significant relationship. Operating expense had a negative significant relationship. Again, employees’ growth and account receivables turnover were found to be insignificant. Based on the findings, the study suggests that the common notion of employee retrenchment and keeping a thin workforce may not necessarily promote financial sustainability. The study recommends that firms should strive to reduce their operating expenses and implement efficient strategies that address asset and inventory turnover.


Key words: Financial sustainability, long-term profitability, stock market performance, efficiency, listed manufacturing companies.