An analysis of working capital management in India: An urgent need to refocus

Abstract

The current study aims to evaluate the impact of working capital components on the financial performance of Indian pharmaceutical companies. Moreover, it aims to analyze working capital among small, medium and large firms. The study uses a panel data of 82 pharmaceutical companies for the period from 2008 to 2017. Generalized Method of Moment (GMM) model is used for estimating the results. Findings show that there is a significant difference in managing working capital among small, medium and large firms. Furthermore, it is found that number of days' collection period, number of days' payable period and number of days' inventory holding period positively impact the financial performance of Indian pharmaceutical companies measured by return on assets and net operating margin. Whereas, cash conversion cycle has a negative impact on return on assets, net operating margin and Tobin's Q.

Corporate governance, working capital management, and firm performance: Some new insights from agency theory

“…Farhan et al (2021) evaluated the impact of WCM on financial performance of firms and concluded that effective management of WC by minimizing the CCC has a positive impact on firms' financial performance, using both accounting‐based and market‐based measures. A study conducted by Lin and Wang (2021) on the WCM and corporate performance by using CCC as the measure of WCM concluded better WCM positively associated with corporations' performance.…”

“…The negative association has also been reinforced by numerous other researches, for example,Padachi (2006) constructed on small industrial corporations of Mauritius,Raheman and Nasr (2007) grounded on 94 companies of Pakistan,Charitou et al (2010) built on 43 companies registered on Stock Exchange of Cyprus, andEnqvist et al (2014) founded on the data of registered corporations of Finland Le (2019). postulated that WC investments or CCC is negatively related with performance of corporates both for market-and accounting-based performance measures, and it is noted that an optimal level of WC will trade off the risk and profitability Farhan et al (2021). evaluated the impact of WCM on financial performance of firms and concluded that effective management of WC by minimizing the CCC has a positive impact on firms' financial performance, using both accounting-based and market-based measures.…”

Does working capital management improve financial performance in China’s agri-food sector during COVID-19? A comparison with the 2008 financial crisis

“…In another emerging economy (i.e. India), Farhan et al [ 47 ] reported that CCC is negatively related to ROA, net profit margin, and Tobin’s Q. Özkaya and Yaşar [ 10 ] also found a negative relationship between them. However, Laghari and Chengang [ 48 ] documented a positive impact of CCC on Chinese companies’ performance.…”

The heavy weight of COVID leadership: an analysis of one international school’s leadership during the pandemic

“…During the pandemic, a number of frameworks were created to guide leaders during a crisis both within and beyond education. These include analysis of government leadership (see Farhan, 2021; Haslam et al, 2021) as well as educational leadership (see Harris and Jones, 2020; Hulme et al, 2021; Marshall et al, 2020; Urick et al, 2021). Whilst any of these frameworks would have proved useful in analysing the vignette, as Wilson’s was published early it was therefore accessible during the planning stage of this article and, perhaps more importantly, the leadership and success of Prime Minister (PM) Ardern had resonated with me during the crisis.…”