This study examines the relationship between working capital management (WCM) and firm performance during and after the financial crisis of 2007-2008 in Nigeria. During the crisis, lending conditions were deeply affected, and financing operations became challenging for firms. Although research findings on the causes and effects of the crisis on the economy are known, what remains unknown is whether the financial crisis had a significant impact on WCM performance. This knowledge is essential for developing resilience to withstand a possible crisis in the future because vulnerability remains high as a result of the deepened integration of many economies. Thus, this study addresses this issue using a sample of 675 firm-year observations from listed firms on the Nigerian stock exchange for the period from 2007 to 2015. The differences between the two periods, the crisis period and then after the crisis period, is operationalised through two analyses. First, OLS regression analysis was conducted to determine the explanatory powers of WCM for the two periods via their R2s. Second, a test of difference using the Cramer Z-statistic for the two periods was conducted. The findings indicate that WCM variables have more explanatory power (R2) in the period after the crisis than during the crisis. Also, the results revealed that the Z-scores are significant, implying that a significant difference existed between the two periods. This means that WCM was affected during the financial crisis and led to low profitability, whereas, during the after-crisis period, WCM associates with higher profitability.
Does Working Capital Management Affect Profitability? Empirical Evidence from Indonesia Listed Firms
