This study investigates empirically the development of working capital management and its impact on profitability and shareholder value in Germany. We analyse panel data of 115 firms listed on the German Prime Standard, covering the period from 2011 to 2017. The results provide evidence that efficient working capital management, indicated by a shorter cash conversion cycle, deteriorated over time, but that a shorter cash conversion has a positive impact on profitability and shareholder value. The findings highlight the need that managers should give greater priority to working capital optimization, even in a low-interest environment. The paper contributes to the literature by advancing this research area in Germany, and it is the first study investigating shareholder relationship with working capital management and all its determinants.

Despite the phase of low interest rates, working capital management remains a key value driver in companies and an important management tool. Our results for 115 companies listed on the most important German stock indexes for the years 2011 to 2017 show that effective working capital management can have a positive impact on profitability and enterprise value. At the same time, our results also show that less attention has recently been paid to working capital management and that digital innovations are probably not yet being used to the extent that seems possible to increase efficiency. Even against the background of continuously low capital market interest rates, this must be viewed critically.