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Impact of Accounts Receivable Period on The Profitability of Quoted Insurance Companies in Nigeria

E. Chuke Nwude, Elias I. Agbo


The paper examines the impact of average collection period on the profitability of quoted insurance companies in Nigeria. The return on assets and account receivable period were the dependent and independent variables respectively. The annual financial reports of 20 quoted insurance companies in Nigeria spanning from 2000 to 2011 constituted the sample of the study. A detailed conceptual framework of debate on the relationship between accounts receivable period and corporate performance was formulated from the review of related literature. The data obtained were utilized in running a cross-sectional regression analysis. The descriptive statistics and correlation matrix were obtained with the aid of the SPSS version 20.0 after conducting some multicollinearity and heteroskedasticity tests. This study used regression analysis as a means for finding out the impact of accounts receivable period on return on assets, taking current ratio, growth, size of the firm, and fixed financial total asset ratio as control variables. The results show that accounts receivable period has negative and insignificant impact on profitability. Current ratio, fixed financial total asset ratio, debt asset ratio and growth have the expected positive relationship whereas the firm size indicates unexpected relationship with profitability. This unexpected correlation may be due to gaps in managerial performance. The study concludes that accounts receivable period does not have a significant causal relationship with the profitability of quoted insurance companies in Nigeria. The fixed effect was negative even though the impact was not significant.

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