Effects of Working Capital Management on Firm Performance: An Empirical Study of Non-financial listed Firms in Pakistan

2014 ◽  
Vol 4 (6) ◽  
Author(s):  
Naeem Ul Hassan ◽  
Malik Muhammad Imran ◽  
Muhammad Amjad ◽  
Mehboob Hussain
Keyword(s):  
Firm Performance ◽  
Empirical Study ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Listed Firms

scholarly journals Working Capital Management and Firm Performance

2018 ◽  
Vol 2 (2) ◽  
pp. 37-50
Author(s):  
Sunday Simon ◽  
Norfaiezah Sawandi ◽  
Mohamad Ali Abdul-Hamid
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Crisis Period ◽  
Listed Firms ◽  
Significant Difference

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.

scholarly journals Does working capital determine firm performance? An empirical research of the emerging economy

2018 ◽  
Vol 2 (1) ◽  
pp. 14-33
Author(s):  
Naseem Ahamed
Keyword(s):  
Firm Performance ◽  
Listed Companies ◽  
Emerging Economy ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Listed Firms ◽  
Cash Conversion Cycle ◽  
Management Efficiency ◽  
The Relationship

The primary objective of this study is to examine the impact of working capital management efficiency on the financial health/well-being of a company measured in terms of firm value in the context of a rapidly emerging economy. This study applies a multivariate ordinary least square regression analysis on industry adjusted performance variable of 1532 Indian firms listed on the National Stock Exchange (NSE) for a period of 18 years (from 1999-2017). Not all of the 1532 firms selected for this study were listed during the whole period of study. Only 610 firms were listed at the beginning and gradually more and more companies started to get listed until eventually 922 more companies got listed to the initial tally of 610 listed firms making the total number of listed companies to be 1532 by the end of the study period. A total of 19862 firm year observations correspond to listed firms and 9246 firm year observations for unlisted firms making it a total of 29108 firm year observations. The findings of this study indicate that an efficient working capital management (proxied by Cash conversion cycle and components thereof) leads to better firm performance when adjusted for industry differences. It also shows that the relationship follows a curvilinear trajectory instead of a linear one as a change in sign in the coefficient of working capital management proxy (Cash Conversion Cycle) occurs and its square term and both are manifesting itself as significant in the listed companies. This is a co-relational study investigating the association between working capital management efficiency and firm performance. The findings of this study is based in an economy that is unique in its own right. Indian corporate landscape is replete with business groups and they dominate the market in terms of asset holding and market capitalization coupled with the existence of institutional gaps and weak legal enforcement mechanisms. All of which makes the Indian corporate landscape totally different from its more developed counterparts thus rendering the results not generalizable. The relationship between these variables should be verified in other economies taking their unique characteristics into account. This study to the best of the author’s knowledge is the first one to investigate the relationship between working capital management and firm performance on such a comprehensive dataset having 62 different industries in an emerging economy. The findings of the study are intended to be of use to financial managers, investors, financial management consultants, and other stakeholders.

Impact of Working Capital Management on Firm’s Profitability & Liquidity: An Empirical Study of TATA Motors Pvt. Ltd.

2016 ◽  
Vol 6 (1) ◽  
Author(s):  
Priyank Sharma
Keyword(s):  
Empirical Study ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
The Impact

Working capital is the funds required for the day to day working of any organization. So it should be managed in effective way to ensure profitability, solvency and survival of the company. Every organization has to manage its working capital in such a way that it does not result in blockage of funds and is able to cater the needs of the organization. In this paper I have tried to show the impact of the mismanagement of working capital on profitability and liquidity of the firm. For this purpose I have taken Tata Motors Pvt. Ltd for the s

scholarly journals The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms

2020 ◽  
Vol 14 (1) ◽  
pp. 9
Author(s):  
Sorin Anton ◽  
Anca Afloarei Nucu
Keyword(s):  
Empirical Evidence ◽  
Ordinary Least Squares ◽  
Optimum Level ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Listed Firms ◽  
Firm Profitability ◽  
Break Even Point ◽  
The Impact

The purpose of this study is to investigate the relationship between working capital and firm profitability for a sample of 719 Polish listed firms over the period of 2007–2016. The scarcity of empirical evidence for emerging economies and the importance of working capital efficiency motivate the research on the working capital–financial performance relationship. The paper adopts a quantitative approach using different panel data techniques (ordinary least squares, fixed effects, and panel-corrected standard errors models). The empirical results report an inverted U-shape relationship between working capital level and firm profitability, meaning that working capital has a positive effect on the profitability of Polish firms to a break-even point (optimum level). After the break-even point, working capital starts to negatively affect firm profitability. The study brings theoretical and practical contributions. It extends and complements the literature on the field by highlighting new evidence on the non-linear interrelation between working capital management (WCM) and corporate performance in Poland. From the practitioners’ perspective, the results highlight the importance of WCM for firm profitability.

scholarly journals The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle

2020 ◽  
Vol 12 (4) ◽  
pp. 1661 ◽  
Author(s):  
Zanxin Wang ◽  
Minhas Akbar ◽  
Ahsan Akbar
Keyword(s):  
Life Cycle ◽  
Firm Performance ◽  
Financial Performance ◽  
Life Cycle Stage ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Conservative Strategy ◽  
Corporate Life Cycle ◽  
The Impact

The purpose of this study is to examine the impact of working capital management (WCM) and working capital strategy (WCS) on firm’s financial performance across different stages of the corporate life cycle (CLC). We use Pakistani non-financial listed firms nested in 12 diverse industries over a period of 2005–2014 as the research sample and employ the hierarchical linear mixed (HLM) estimator, which can process multilevel data where observations are not completely independent. The empirical findings reveal that, overall, WCM is negatively associated with firm performance. However, this association is not static across different stages of a firm’s life cycle. For example, a negative association is more pronounced at the introduction stage followed by growth and decline stages, whereas WCM does not significantly impact the performance of mature firms. Likewise, WCS also causes varying effects on the financial performance across the CLC. A conservative strategy at the introduction, growth, and decline stages negatively affects firm performance, suggesting that these firms should adopt an aggressive strategy. Nevertheless, management of sample firms did not account for the respective life cycle stage while formulating a WCM strategy, which can seriously compromise their financial sustainability. These findings suggest that firms require customized WCM policies and WCS to attain sustainable financial performance at each stage of firm life cycle. Thus, managers should not overlook the significant role of CLC stages in their financial planning to ensure the sustainable functioning of the enterprise.

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