Information technology investment and working capital management efficiency: evidence from India survey data

Gill, Amarjit; Kang, Parminder Singh; Amiraslany, Afshin

doi:10.1108/sajbs-06-2021-0239

Cited by 3 publications

(3 citation statements)

References 49 publications

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“…Meanwhile, a positive significant relationship between efficiency and profitability is justifiable as assets turnover and both ratios ROA and ROE measure company efficiency. Similar positive significant relationship is found for WC, as linkage between operational efficiency and WC was justified by several studies (Gill et al , 2022). Firms with high volatility of operational results particularly young SMEs have lower probability of survival, whereas old SMEs’ high volatility could contribute positively to company’s performance.…”

Section: Discussionsupporting

confidence: 80%

The determinants of profitability in non-financial UK SMEs

Youssef¹,

Salloum²,

Sayah³

2022

EBR

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Purpose The purpose of this study is to examine determinants of profitability of non-financial firms listed small- and medium-sized enterprises (SMEs) in the UK from 2012 till 2020. It has been argued that profitability plays a key role in economic development and growth. Despite the important role that SMEs play in developed economies like UK, academic research into SMEs profitability determinants in developed countries is not extensive. Design/methodology/approach The methodologies used include dynamic panel data estimation techniques. Relationship of nine independent variables with profitability was examined. Two models are created using return on assets (ROA) and return on equity (ROE) as dependent variables. Size, age, efficiency, working capital, liquidity, leverage and volatility of the firm represent firm-specific independent variables. Two macroeconomic variables, namely, gross domestic product and inflation are also used as independent variables. Data obtained from Thomson Reuters Data Stream for 93 listed SMEs companies in the UK from 2012 to 2020. Fixed effects, random effects and generalized method of moments were used in data analysis. Findings All variables showed significant influence on profitability, except liquidity reflecting insignificant impact on profitability in two regression models conducted for 93 firms under study. Efficiency, liquidity and leverage are the only three independent variables with similar impact on both ROA and ROE. Practical implications Identifying determinants of profitability will help stakeholders and corporate executive make sound decisions to ensure sustainability and stability at the firm level. This is particularly important given the key role played by SMEs in economic development and growth. The findings of this study would help direct financial management practices to ensure a favorable sustainable organizational performance. Originality/value This study differs from previous studies that focused mainly on developing countries; with limited research conducted on profitability of SMEs in developed economies. To the best of the author’s knowledge, this is the first study to examine factors influencing profitability of SMEs in UK. Previous studies concentrated on service sector like insurance and hotel firms.

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Section: Discussionsupporting

confidence: 80%

The determinants of profitability in non-financial UK SMEs

Youssef¹,

Salloum²,

Sayah³

2022

EBR

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“…Advanced IT capabilities also make it easier for supply chain partners to coordinate among themselves (Banker et al, 2006; Dehning et al, 2007; Gelsomino et al, 2016). A recent study, by Gill et al (2022), showed that IT investment improves working capital management by decreasing inventory holding periods and cash conversion cycles.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of working capital on firm performance: DoesITmatter?

Deb

Naskar

Devaraj

et al. 2023

J of Ops Management

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Although prior research in operations management has explored the working capital—firm performance relationship, the results from these studies remain inconclusive, with studies finding positive, curvilinear, or even insignificant relationships. This is largely due to contingent factors that make this relationship both complex and idiosyncratic. To strengthen the beneficial effect of working capital on performance, firms must therefore make appropriate investments that would foster more objective, informed, and firm‐specific working capital choices. This article examines one such investment, namely in information technology (IT), that can allow firms to optimize the working capital–firm performance relationship. This is important, as the role of IT in this relationship is yet to be explored. Using proprietary IT data from the Harte Hanks database, and based on a sample of 1,054 US‐based manufacturing firms during 2011–2013, we find that IT investment positively moderates the performance effects of inventory, payables, and receivables cycles, and that these moderating effects vary by the type of IT investment, namely IT infrastructure and IT labor. Drawing on the theory of the Smart Machine, we explain how IT infrastructure and IT labor perform distinct roles that can help automate (i.e., use technology to increase the speed and accuracy of process execution) and/or informate (i.e., use technology to create new information), thereby moderating the working capital–firm performance relationship. We argue and find evidence that, due to the largely transactional nature of working capital processes, IT infrastructure has a relatively stronger moderating effect on performance than IT labor.

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“…Prior research finds that countries with safer legal systems and better investor protection have more efficient working capital (Mättö and Niskanen, 2020). In addition, Gill et al (2022) show that IT investment reduces the inventory holding period and the cash conversion cycle (CCC), and, thereby, improving WCM efficiency.…”

Section: Introductionmentioning

confidence: 99%

Managerial ability and the efficiency of working capital

احمد¹

2022

مجلة البحوث المالیة والتجاریة

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This paper investigates the link between managers' ability and working capital efficiency. The main conjecture of the study is that managerial ability is positively associated with working capital efficiency. Using a sample of US companies, the paper finds that increased managerial ability moves the working capital toward the optimal level. This study extends the working capital management literature by showing that working capital efficiency is not only elicited by a firm's characteristics but also by managerial ability. This result sheds light on the benefits of hiring managers with higher abilities.

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Information technology investment and working capital management efficiency: evidence from India survey data

Cited by 3 publications

References 49 publications

The determinants of profitability in non-financial UK SMEs

The determinants of profitability in non-financial UK SMEs

Impact of working capital on firm performance: DoesITmatter?

Managerial ability and the efficiency of working capital

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