Working Capital Management and Firms’ Profitability: Dynamic Panel Data Analysis of Manufactured Firms

Kafeel,; Ali, Javed; Din, Maaz Ud; Waris, Abdul; Tahir, Muhammad; Khan, Sher

doi:10.4236/jfrm.2020.94027

Cited by 10 publications

(9 citation statements)

References 29 publications

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Section: Methodsmentioning

confidence: 96%

“…This work employs the pooled OLS, panel regression and dynamic panel data in GMM procedures to ensure the robustness of the results. Previous literature follows a similar process (Boțoc and Anton, 2017;Kafeel et al, 2020). DWCM variables, firm control (FC) variables, macroeconomic controls (MC) and sustainability dummy (ESG) are regressed against OE variables.…”

Section: Estimationmentioning

confidence: 99%

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Impact of dynamic working capital management on operational efficiency: empirical evidence from Scandinavia

Yeboah,

Kjærland

2024

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PurposeConsumer goods firms often tie up inventory and accounts receivable resources, creating cost and liquidity issues. Dynamic working capital management (DWCM) can mitigate these concerns and enhance operational profitability. The study investigates DWCM's impact on operational efficiency (OE).Design/methodology/approachThe empirical estimation uses pooled ordinary least squares (OLS), random effect and system generalized method moments (GMM) regression analysis of consumer goods firms in Scandinavia from 2005 to 2022 to present the results.FindingsThe findings indicate that DWCM has an inverse relationship with operating cost, while positively impacting operating profit. The final outcome demonstrates that DWCM enhances OE. Furthermore, the working capital ratio (WCR) consistently exceeds the cash conversion cycle (CCC) in all models, indicating that prudent management of cash in accounts receivable, inventory and accounts payable leads to higher cost savings and superior performance.Practical implicationsThe results suggest that organizations that prioritize the management of the absolute cash committed to inventory, receivables and payables as much as the CCC experience improved OE.Originality/valueThis paper adds to the literature on how DWCM affects OE in the consumer goods sector. It also highlights the impact of time management and cash management in WCM on OE. Additionally, it analyzes how DWCM variables affect operating costs and profits, shedding light on their efficiency impact.

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Section: Methodsmentioning

confidence: 96%

Section: Estimationmentioning

confidence: 99%

Impact of dynamic working capital management on operational efficiency: empirical evidence from Scandinavia

Yeboah,

Kjærland

2024

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“…Correlation analysis showed that there is no statistically significant correlation between profitability indicator of return on assets (ROA) and days sales outstanding. Kafeel Ali et al (2020) and Prša (2020) found a weak negative correlation between profitability indicator and the days sales outstanding, while Kušter (2022) and Hossain (2020) found a negative and statistically significant correlation between profitability and receivables. As expected, the research found a statistically significant negative, but weak correlation between the indicator of return on assets (ROA) and the days inventory outstanding (r = -0.12, p < 0.05).…”

Section: Correlation Analysismentioning

confidence: 98%

“…An analysis of the literature, which comprises research that includes the analysis of working capital management in certain industries, diagnosed that the most prevalent is the manufacturing industry (Chakraborty 2008;Perković 2012;Uremadu, Egbide, and Enyi 2012;Almazari 2014;Jakpar et al 2017;Iqbal et al 2017;Utia, Dewi, and Sutisna 2018;Kafeel Ali et al 2020;Aytac et al 2020;Prša 2020;Amponsah-Kwatiah and Asiamah 2020;Hossain 2020;Golas 2020;Pham, Nguyen, and Nguyen 2020;Olaoye and Okunade 2020;Arnaldi et al 2021;Hameer, Ramakrishnan and Gillani 2021;Fejzullachi and Govori 2021;Aldubhani et al 2022;Kušter 2022 and others).…”

Section: Introductionmentioning

confidence: 99%

“…and cash conversion cycle(Perković 2012;Banos-Caballero, Garcia-Teruel and Martinez Solano 2014;Golas 2020;Aytac et al 2020;Olaoye and Okunade 2020).The dependent variable that is most often used to measure profitability is return on assets ROA (Garcia-Teruel and Martinez-Solano 2007; Uremadu, Egbide, and Enyi 2012;Gul et al 2013;Enqvist, Graham, and Nikkinen 2014;Iqbal, et al 2017;Pham, Nguyen, and Nguyen 2020; Amponsah-Kwatiah and Asiamah 2020; Fernandez-Lopez, Rodeiro-Pazos, and Rey-Ares 2020;Hossain 2020;Golas 2020;Kafeel Ali et al 2020;Hameer, Ramakrishnan and Gillani 2021; Kušter 2022 and others). Different variables are used to calculate return on assets (ROA) indicator.…”

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confidence: 99%

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The Influence of Working Capital Management on the Profitability of Manufacturing Enterprises - The Case of Croatia

Stanić,

Cita,

Šulentić

2023

South East European Journal of Economics and Business

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The aim of this research is to examine the relationship between working capital management and the profitability of Croatian manufacturing enterprises and to provide empirical evidence on the effects of working capital management on the level of profitability of manufacturing enterprises in the Republic of Croatia in the period from 2018 to 2021. The collected data were analyzed through multiple regression analysis, using a panel regression model with random effects. By analyzing panel data, the impact of receivables from customers, inventories, liabilities to suppliers, sales growth and GDP growth on the profitability of Croatian manufacturing companies was examined. The analysis of panel data examined the impact of trade receivables, inventories, payables, sales growth and GDP growth on the profitability of Croatian manufacturing enterprises. The obtained results also suggest that the variables the days sales outstanding, the days inventory outstanding and GDP growth are not statistically significant.

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Assessment of the impact of financial indicators based on the multiple linear regression model

Dalisova,

Martynova,

Eremeev

2023

E3S Web of Conf.

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One of the criteria for effective working capital management is the financial cycle of a commercial organization, but indicators such as liquidity and return on assets also play a great role in financial planning. Despite the fact that these indicators play an important role in the financial management of the company, the nature of their relationships is ambiguous. Based on theoretical research, we can say that there is an inverse relationship between the financial cycle and return on assets. In the presented work, based on the model of multiple linear regression, an assessment of this statement about feedback was carried out, using the example of the leading telecommunications companies of the Russian Federation. The study mathematically proved that there is a weak relationship between the financial cycle and the return on assets of telecommunications companies.

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Working Capital Management and Firms’ Profitability: Dynamic Panel Data Analysis of Manufactured Firms

Cited by 10 publications

References 29 publications

Impact of dynamic working capital management on operational efficiency: empirical evidence from Scandinavia

Impact of dynamic working capital management on operational efficiency: empirical evidence from Scandinavia

The Influence of Working Capital Management on the Profitability of Manufacturing Enterprises - The Case of Croatia

Assessment of the impact of financial indicators based on the multiple linear regression model

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