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Working Capital Management and Financial Performance: Evidence from Non - Financial Firms Listed in Nepal Stock Exchange Limited

Author Details ( * ) denotes Corresponding author

1. * Mohit Singh Thagunna, M.Phil. in Management, Head of Research and Evaluation, Kathmandu, Nepal (

Purpose: This study examines the impact of working capital management on the financial performance of the non-financial firms listed on the Nepal Stock Exchange (NEPSE).
Design/Methodology/Approach: The study is based on panel data analysis of 23 non - financial firms listed in NEPSE from 2001 to 2018 with 194 firm-year observations. When the return on assets (ROA) is used as a dependent variable, the Hausman Test and Wald Test suggest that a Fixed Effect Model (FEM) is acceptable, whereas Random Effect Model (REM) is appropriate when the return on equity is used as a dependent variable. 
Findings: The results reveal that longer receivable conversion period and inventory conversion period negatively affect the financial performance of non-financial firms. In addition, a longer payable deferral period negatively affects the return on equity of non-financial firms in Nepal, indicating that firms can reap profit by reducing the deferral period.Finally, the study shows a statistically significant relationship between the cash conversion cycle and return on assets. 
Research Limitations/Implications: The research is based solely on secondary data. As a result, the study contains all of the drawbacks that come with financial statements in annual reports.
Practical Implications: The findings of the study will help owners and financial managers in better understanding the relationships between working capital management and financial performance of the firms, as well as formulating firm-specific working capital policies. Moreover, research scholars will benefit from this study as it aims to add to the existing literature by enhancing knowledge of the impact of working capital management on financial performance.
Originality/Value: This is an original research study and examines the relationship between working capital management and financial performance of non-financial firms listed in NEPSE.


Cash Conversion Cycle; Nepal stock exchange; Profitability; Secondary data; Stepwise regression

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