Is the relationship between working capital management and firm profitability non-linear in Indian SMEs?

Ahangar, Nufazil

doi:10.1080/13215906.2021.1872685

Cited by 15 publications

(11 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This finding therefore partly supports Hypothesis 4 [H4] i.e., the inverse relationship between CCC and ROA but not in its entirety as the positive association between the squared form of CCC and ROA was ignored. This finding is consistent with previous research findings like Korent & Orsag (2018), Altaf & Shah (2018), Asiedu et al (2020), Ahangar (2021) among others.…”

Section: Research Findings and Discussionsupporting

confidence: 94%

The Impact of Working Capital Management on the performance of Listed Firms: Evidence of an Emerging Economy

Essel

Brobbey

2021

IJIM

View full text Add to dashboard Cite

The aim/purpose of this scientific inquiry is to empirically examine the impact of working capital management (WCM) [cash conversion cycle (CCC), number of days inventory (INV), number of days account receivable (AR), number of days account payable (AP)] and control variables [sales growth (GROW), size (SIZE), leverage (LEV), current ratio (CR) fixed financial assets to total assets (FFA)] on firm performance (FP) [ROA, Tobin’s Q (TQ)] in the context of an emerging economy, Ghana. The research used a dynamic panel System of Generalized Method of Moment (GMM) to test the hypotheses. Utilizing financial data extracted from final accounts of 36 listed companies, spanning 2010-2019, the study examined WCM-performance-nexuses by following the methodologies of researchers/scholars in extant literature. Findings/Results indicates that, whilst INV, AR, LEV demonstrated negative/inverse/indirect associations with FP; AP, GROW, SIZE, CR, FFA depicted positive/direct associations with FP. CCC however, exhibited a quadratic concave relationship with ROA.

show abstract

Section: Research Findings and Discussionsupporting

confidence: 94%

The Impact of Working Capital Management on the performance of Listed Firms: Evidence of an Emerging Economy

Essel

Brobbey

2021

IJIM

View full text Add to dashboard Cite

show abstract

“…In 2016, India witnessed demonetization, causing a momentary cash shortfall in the economy. Being highly dependent on cash and laborintensive, the textile industry faced cash flow disruptions, untimely payment of workers, The Indian transport equipment industry (TEI) relies heavily on short-term funds availability and financing sources due to its production requirements and less supplier availability (Ahangar, 2021). Figure 3 showcases that this industry has managed to maintain WCME at around 40 to 50% from 2008 to 2019.…”

Section: Resultsmentioning

confidence: 99%

“…A prospective manufacturer thus entails using hard technologies (such as tangible components, computer-aided manufacturing, equipment, computer hardware, robots, etc.) and soft technologies (like human areas of decision-making, manufacturing techniques, statistical quality control, total quality management, just-in-time and others) efficiently to add to the financial performance of manufacturing firms (Ahangar, 2021;Lefebvre, 2023).…”

mentioning

confidence: 99%

Assessment of working capital management efficiency – a two-stage slack-based measure of data envelopment analysis

Seth,

Deepak,

Ruparel

et al. 2024

View full text Add to dashboard Cite

PurposeThis study aims to assess the efficiency of managing working capital in 1,388 Indian manufacturing firms from 2008 to 2019 and investigate the effects of firm-specific and macro-level determinants on working capital management (WCM) efficiency.Design/methodology/approachThe current study accommodates a slack-based measure (SBM) in data envelopment analysis (DEA) for computing WCM efficiency. Further, we implement a panel data fixed-effects model that controls for heterogeneity across firms in determining the relationships of selected variables with WCM efficiency.FindingsThe results highlight that manufacturing firms operate at around 50 percent efficiency, which is constant throughout the study period. Furthermore, among the selected variables, yield, earnings, age, size, ability to create internal resources, interest rate and gross domestic product (GDP) significantly affect WCM efficiency.Originality/valueInstead of the traditional models used for assessing efficiency, the SBM-DEA model is unit-invariant and monotone for slacks, implying that it can handle zero and negative data, which overcomes the incapability of prior DEA models. Hence, this provides accurate efficiency scores for robust analysis. Additionally, this paper provides a holistic working capital model recognizing firm-specific and macro-level determinants for a more explicit estimation of the relationship between WCM efficiency and the selected determinants.

show abstract

“…As the last group works, the findings regarding the existence of a nonlinear relationship between WC variables and financial performance have been reported in empirical studies conducted by Afrifa et al (2014), Mun and Jang (2015), Boțoc and Anton (2017), Singhania and Mehta (2017), Anton and Afloarei Nucu (2020), Prempeh and Peprah-Amankona (2020), Ahangar (2021), Akbar et al (2021), Chambers and Cifter (2022), and Ersoy et al ( 2022) Jaworski and Czerwonka (2022).…”

Section: Literature Reviewmentioning

confidence: 88%

The Effect of Working Capital Management on the Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)

2022

View full text Add to dashboard Cite

An effective working capital can contribute to achieving the firm’s financial profitability, increasing the value of companies, creating a short-term financing source, continuing their activities and increasing their sustainability. This study examines the effect of working capital management on firm performances (ROA and TOBIN's Q) of firms operating in the textile industry in 4 countries (Brazil, India, Indonesia and Turkey) called the Fragile Five countries between 2010 and 2020. In the estimation of the coefficients of the panel regression models determined in this study, the Driscoll-Kraay estimator, which is robust against the problems of unobserved heterogeneity, autocorrelation, varying variance and cross-section dependence, was used. In the general evaluation of the panel data analysis estimation results, it is seen that the effect of working capital management on financial performance differs significantly depending on the selected performance variable. All of these results show that successful and effective working capital management in the textile sector depends on taking into account the differences in economic conditions, differences in capital markets, financial market performance and daily working habits, and evaluating each component of working capital separately.

show abstract

Is the relationship between working capital management and firm profitability non-linear in Indian SMEs?

Cited by 15 publications

References 35 publications

The Impact of Working Capital Management on the performance of Listed Firms: Evidence of an Emerging Economy

The Impact of Working Capital Management on the performance of Listed Firms: Evidence of an Emerging Economy

Assessment of working capital management efficiency – a two-stage slack-based measure of data envelopment analysis

The Effect of Working Capital Management on the Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)

Contact Info

Product

Resources

About