Operating Cash Flow Ratio, Operating Profit Margin and Stock Returns of Quoted Manufacturing Companied in Nigeria

Abstract

The study examined the effect of Operating Cash Flow Ratio (OCFR) and operating profit Margin (OPM) as performance measurement variables on stock returns of manufacturing companies in Nigeria. This is sequel to the fact of both individuals and institutions. Ex-post facto research design was adopted for the research involving time series data for a selected manufacturing companies for the period 2015 to 2025. Data on the variables were computed from published annual financial statement of the companies. These were analyzed suing ordinary Least Squares (OLS) regression approach following and inferential result revealed that the data were normally distributed, absence of multicollinearity and auto-correlation among the variables. OCFR and OPM had positive but statistically insignificant effects on stock returns (OCFR; 𝛽 = 0.000195, P-value 0.8356 > 0.05; OPM; 𝛽 = 0.003794, P-value = 0.3705 > 0.05). the correlation coefficient (R) and coefficient and coefficient of determination (R2) also showed weak relationship and extent of determination. It was concluded that OCFR and OPM are weak influences of stock returns, and therefore, recommend investors to consider other macro-economic variables when taking investment decision on manufacturing sector.