Disentangling Liquidity-Performance Dynamics: Firm Size as a Strategic Moderator Among Listed Healthcare and Pharmaceutical Industry in Emerging Economies

Abstract

This study investigates the moderating role of firm size in the relationship between liquidity and financial performance among Nigeria’s listed healthcare and pharmaceutical manufacturing firms over the period 2014 to 2023. Using a balanced panel dataset of 10 publicly traded firms, the study employs Generalized Least Squares (GLS) estimation to account for panel-level heteroscedasticity and individual effects. The analysis evaluates the influence of three core liquidity indicators, including current ratio, quick ratio, and cash ratio, on return on assets (ROA), with firm size introduced as a moderating variable. Descriptive statistics and correlation diagnostics reveal significant variation in liquidity levels, while normality and multicollinearity tests confirm the robustness of the regression. Findings indicate that the current ratio exerts a significant negative influence on ROA, and firm size positively moderates this relationship. However, quick ratio and cash ratio exhibit no significant direct effects or interaction effects with firm size. These outcomes suggest that optimal liquidity management is critical for profitability, particularly in firms of varying operational scales. The study extends liquidity-performance literature by emphasizing firm characteristics, and it offers implications for liquidity governance, firm scalability, and sectoral competitiveness.