Macroeconomic factors, working capital management, and firm performance—A static and dynamic panel analysis

Abstract

The aim of the study is to explore the interaction effect of macroeconomics indicators, and working capital flows on financial performance in a developing economy. By using the static and dynamic approach of panel analysis, it has been shown that there is a relationship between the components of working capital and the gross profit and cash conversion duration. Second, while interest rates used as an interaction variable with the average payable days have adverse effects, firm performance would decrease if interest rates increase. The average payable duration extends; instead of primarily regressing, the average payable period positively correlates with firm performance. The conversion cycle of cash has a negative relationship, but it reverses its actions after using interest rate interaction. There is a negative relationship with gross profit in the simple regression exchange rate and cash conversion cycle while using the second interaction variable with the cash conversion cycle, has positive effects. In addition, the exchange rate gets higher to increase the cash conversion length, financial performance will be increased. In addition, the exchange rate gets higher to increase the cash conversion length, financial performance will be increased. This study receives new results, the exchange rate increases, companies that can pay early to payable will get higher firm performance while exchange rate and the interest rate have a significant role in changing the firm performance.

Working Capital Management and Financial Performance of Agricultural Firms Listed on Nairobi Securities Exchange, Kenya

“…Working capital management is considered critical for firms especially for agricultural firms, where a3major part of3assets is composed3of current assets (Bhattacharya, 2021). Working3capital management influences financial performance3as well as3the liquidity of firms (Hussain, Nguyen, Nguyen, Nguyen & Nguyen, 2021). The financial performance liquidity trade-off3is critical because3if working capital3management is3not prioritised, businesses will fail and face bankruptcy (Alhassan & Islam, 2021).…”

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

“…However, in quest of this objective, the firm needs to maintain sufficient operational liquidity in order to be in a position to finance its daily operational activities. A crucial assignment for corporate finance executives/administrators is to attempt to strike a trade-off between profitability and liquidity such that in pursuit of short-term profitability, liquidity is not compromised as this could result in long term insolvency (Hussain et al, 2021). Managing a firm's WC efficiently is the status quo for contemporary organizations to remain ABSTRACT -The purpose of this scientific inquiry is to empirically examine the impact of working capital management (WCM) on firm performance (FP) in the context of an emerging economy, Ghana.…”

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

“…These studies reported that the effect of CCC on financial performance variables is negative. Also, Deloof (2003), García-Teruel and Martínez-Solano (2007), Mansoori and Muhammad (2012), Aygun (2012), Ukaegbu (2014), Pais and Gama, (2015), Hussain et al (2021), Gołaś (2020), on the other hand, reported that there is a negative correlation between the CCC and the elements that make up the CCC and performance indicators.…”

“…Because firms with a shorter CCC have more cash flow and a more aggressive WC policy, which indicates that they will seek less external financing and be more profitable. Thus, a short CCC may be beneficial for firm financial performance (Banos-Caballero et al, 2013;Hussain et al, 2021).…”