Journal Press India^®

Author Details ( * ) denotes Corresponding author

The objective of this study is a systematic review of the prior empirical research work that examine the impact of working capital management on the firm’s financial performance. Here, a total of 63 empirical research works from 36 developed and developing countries of the world published during the period 2000 to 2017 are considered in this study. Findings show a mixed impact (positive, negative and insignificant) of different components of working capital management on firm’s performance. But frequency of negative impact is very high in comparison to that of positive and insignificant impacts. It also reveals from this study that in most of the past studies linear relation between working capital management and firm’s performance is investigated.

Keywords

Working capital management; Firm performance, Tobin q

1. Afrifa, G.A. & Padachi, K. (2016). Working capital level influence on SME profitability. Journal of Small Business and Enterprise Development, 23(1), 44-63.
2. Agyei, S.K. & Yeboah, B. (2011). Working capital management and profitability of banks in Ghana, British Journal of Economics, Finance and Management Sciences, 2(2), 1-12.
3. Akoto, R.K., Awunyo-Vitor, D., & Angmor, P.L. (2013). Working capital management and profitability: evidence from Ghanaian listed manufacturing firms. Journal of Economics and International Finance, 5(9), 373-379.
4. Al-Debi'e, M. M. (2011). Working capital management and profitability: The case of industrial firms in Jordan. European Journal of Economics, Finance and Administrative Sciences, 36(1), 75-86.
5. Alipour, M. (2011). Working capital management and corporate profitability: Evidence from Iran. World Applied Sciences Journal, 12(7), 1093-1099.
6. Almazari, A.A. (2014). The relationship between working capital Management and profitability: evidence from Saudi cement companies. British Journal of Economics, Management & Trade, 4(1), 146-157.
7. AlShattarat, W.K. (2010). Working capital management, operating cash flow and corporate performance. International Journal of Strategic Management, 10(1), 84-88.
8. Arachchi, A.N.H., Perera, W. & Vijayakumaran, R. (2017). The impact of working capital management on firm value: Evidence from a frontier market. Asian Journal of Finance & Accounting, 9(2), 399-413.
9. Arbidane, I. & Ignatjeva, S. (2012). The relationship between working capital management and profitability: a Latvian case. Proceeding of European Business Research Conference, August 2012. Retrieved from https://ssrn.com/abstract=2128447.
10. Arunkumar, O.N. & Ramanan, T.R. (2013). Working capital management and profitability: A sensitivity analysis. International Journal of Research and Development - A Management Review, 2(1), 52-58.
11. Bagchi, B. & Khamrui, B. (2012). Relationship between working capital management and profitability: a study of selected FMCG companies in India. Business and Economics Journal, 60(1), 1-12.
12. Banso-Cabellero, S., Garcia-Terueal, P. & Martinez-Solano, P. (2014). Working capital management, corporate performance, and financial constraints. Journal of Business Research, 67(3), 332-338.
13. Bieniasz, A. & Golas, Z. (2011). The influence of working capital management on the food industry enterprises profitability. Contemporary Economics, 5(4), 68-81.
14. Chatterjee, S. (2012). The impact of working capital on the profitability: evidence from the Indian firms. Unpublished master’s thesis, London School of Business and Finance, UK.
15. Ching, H.Y., Novazzi, A. & Gerab, F. (2011). Relationship between working capital management and profitability in Brazilian-listed companies. Journal of Global Business and Economics, 3(1), 74-86.
16. Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3 & 4), 573-587.
17. Dong, H.P. & Su, J.T. (2010). The relationship between working capital management and profitability: A Vietnam case. International Research Journal of Finance and Economic Issue, 49(1), 59-67.
18. Ebben, J.J. & Johnson, A.C. (2011). Cash conversion cycle management in small firms: relationships with liquidity, invested capital, and firm performance. Journal of Small Business and Entrepreneurship, 24(3), 381-396.
19. Eljelly, A. (2004). Liquidity-profitability trade off: an empirical investigation in an emerging market. International Journal of Commerce and Management, 14(2), 48-61.
20. Enqvist, J., Graham, M. & Nikkinen, J. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance, 32(1), 36-49.
21. Falope, O.I. & Ajilore, O.T. (2009). Working capital management and corporate profitability: Evidence from panel data analysis of selected quoted companies in Nigeria. Research Journal of Business Management, 3(3), 73-84.
22. Garcia-Teurel, P., & Martinez-Solano, P. (2007). Effects of working capital management on SME profitability. International Journal of Managerial Finance 3(2), 164-177.
23. Garcia, J.F.L., Martins, D.F.V. & Brandao, D.E. (2011). The impact of working capital management upon companies’ profitability: Evidence from European companies. Working paper, The School of Economics of Porto University, Portugal, Working paper series no 438.
24. Gill, A., Biger, N. & Mathur, N. (2010). The relationship between working capital management and profitability: evidence from the United States. Business and Economics Journal, 10(1), 1-9.
25. Gomes, D.F.N. (2013). How does working capital management affect firms´ profitability? Evidence from Portugal. Unpublished master’s thesis, Lisboa School of Economics and Management, Lisbon, Portugal.
26. Hoang, T.V., (2015). Impact of working capital management on firm profitability: the case of listed manufacturing firms on Ho Chi Minh Stock Exchange. Asian Economic and Financial Review, 5(5), 779-789.
27. Jayarathne, T.A.N.R. (2014), Impact of working capital management on profitability: evidence from listed companies in Sri Lanka, Proceedings of the 3^rd International Conference on Management and Economics, February 2014, Faculty of Management and Finance, University of Ruhuna, Sri Lanka.
28. Kumar, S. (2015). The significance of working capital management and its components on SMES performance - evidence from India, Proceeding of 16th International Academic Conference, (12-15 May, 2015), International             Institute of Social and Economic Sciences, Amsterdam, Czech Republic.
29. Lazaridis, I., & Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed companies in the Athens Stock Exchange. Journal of Financial Management and Analysis, 19(1), 26-35.
30. Makori, D.M. & Jagongo, A. (2013), Working capital management and firm profitability: empirical evidence from manufacturing and construction firms listed on Nairobi securities exchange. International Journal of Accounting and Taxation, 1(1), 1-14.
31. Malik, M.S. & Bukhari, M. (2014). The impact of working capital management on corporate performance: a study of firms in cement, chemical and engineering sectors of Pakistan. Pakistan Journal of Commerce and Social Sciences, 8(1), 134-148.
32. Mansoori, E. & Muhammad, J. (2012). The effect of working capital management on firm‘s profitability: evidence from Singapore. Interdisciplinary of Contemporary Research in Business, 4(5), 478-486.
33. Manzoor, H. (2013). Working capital management and profitability: evidence from cement sector of Pakistan, listed on Karachi stock exchange. Journal of Business Administration and Management Sciences Research, 2(10), 215-223.
34. Mathuva, D.M. (2010). The influence of working capital management components on corporate profitability: a survey on Kenyan listed firms. Research Journal of Business Management, 4(1), 1-11.
35. Muscettola, M. (2014). Cash conversion cycle and firm’s profitability: An empirical analysis on a sample of 4,226 manufacturing SMEs of Italy. International Journal of Business and Management, 9(5), 25-35.
36. Napompech, K. (2012), Effects of working capital management on the profitability of Thai listed firms. International Journal of Trade, Economics and Finance, 3(3), 227-232.
37. Ncube, M. (2011). Impact of working capital on the profitability of South African firms listed on the Johannesburg stock exchange. Unpublished master’s thesis, Faculty of Commerce, Law and Management, Wits business school, University of the Witwatersrand, South Africa.
38. Nobanee, H. & Haddad, A.E. (2014). Working capital management and corporate profitability of Japanese firms. The Empirical Economics Letters, 13(1), 39-44.
39. Nobanee, H. & AlHajjar, M. (2014).An optimal cash conversion cycle. International Research Journal of Finance and Economics, March(120), 13-22.
40. Nyamweno, C.N. & Olweny, T. (2014). Effect of working capital management on performance of firms listed at the Nairobi securities exchange. Economics and Finance Review, 3(11), 01-14.
41. Ogundipe, S.E., Idowu, A. & Ogundipe, L.O. (2012). Working capital management, firms’ performance and market valuation in Nigeria. World Academy and Science, Engineering and Technology, 61(1), 1196-1200.
42. Padachi, K. (2006). Trends in working capital management and its impact on firm’s performance: an analysis of Mauritian small manufacturing firms. International Review of Business research papers, 2(2), 45-58.
43. Pais, M.A. & Gama, P.M. (2015).Working capital management and SMEs profitability: Portuguese evidence. International Journal of Managerial Finance, 11(3), 341-358.
44. Quayyum, S.T. (2011). Effects of working capital management and liquidity: evidence from the cement industry of Bangladesh. Journal of Business and Technology (Dhaka), 6(1), 37-47.
45. Raheman, A. & Nasr, M. (2007). Working capital management and profitability-case of Pakistani firms. International Review of Business Research Papers, 3(1), 279-300.
46. Ray, S. (2012). Evaluating the impact of working capital management components on corporate profitability: Evidence from Indian manufacturing firms. International Journal of Economic Practices and Theories, 2(3), 127-136.
47. Rehn, E. (2012). Effects of working capital management on company profitability. Unpublished master’s thesis, Department of Accounting, Hanken School of Economics, Helsinki, Finland.
48. Rezazadeh, J. & J. Heidarian (2010). The effect of working capital management on profitability of Iranian companies. Accounting Research, 89(7), 20-28.
49. Samiloglu, F. & Akgun, A.I. (2016). The relationship between working capital management and profitability: evidence from Turkey. Business and Economics Research Journal, 7(2), 1-14.
50. Samiloglu, F. & Demirgunes, K. (2008). The effect of working capital management on firm profitability: evidence from Turkey. The International Journal of Applied Economics and Finance, 2(1), 44-50.
51. Shah, A. & Sana, A. (2006). Impact of working capital management on the profitability of oil and gas sector of Pakistan. European Journal of Applied Economics and Finance, 2(1), 44-50.
52. Sharma, A.K. & Kumar, S. (2011). Effect of working capital management on firm profitability: empirical evidence from India. Global Business Review, 12(1), 159-173.
53. Shin, H.H. & Soenen, L. (1998). Efficiency of working capital management and corporate profitability. Financial Practice and Education, 8(2), 37-45.
54. Soykan, M. E. & Ulucak, R. (2016). Is there a non-linear relationship between net trade cycle and corporate performance in Turkey? International Business Research, 9(6), 95-101.
55. Tauringana, V. & Afrifa, G.A. (2013). The relative importance of working capital management and its components to SMEs profitability. Journal of Small Business & Enterprise Development, 20(3), 453-469.
56. Ukaegbu, B. (2014). The significance of working capital management in determining firm profitability: evidence from developing economies in Africa. Research International Business and Finance, 31(1), 1-16.
57. Uremadu, S.O. & Egbide, B.C. (2012), Working capital management, liquidity and corporate profitability among quoted firms in Nigeria: evidence from the productive sector. International Journal of Academic Research in Accounting, Finance and Management Sciences, 2(1), 80-97.
58. Uyar, A. (2009). The relationship of cash conversion cycle with firm size and profitability: an empirical investigation in Turkey. International Research Journal of Finance and Economics, 24(2), 186–193.
59. Vahid, (2012).Working capital management and corporate performance: Evidence from Iranian companies. Procedia - Social and Behavioral Sciences, 62(1), 1313-1318.
60. Vural, G., Sokmen, A. G. & Çetenak, E. H. (2012). Affects of working capital management on firm’s performance: Evidence from Turkey. International Journal of Economics and Financial Issues, 2(4), 488-495.
61. Wang, Y.J. (2002). Liquidity management, operating performance, and corporate value: evidence from Japan and Taiwan. Journal of Multinational Financial Management, 12(2), 159-69.
62. Yahaya, A. (2016). Effects of working capital management on the financial performance of the pharmaceutical firms in Nigeria. International Journal of Economics, Commerce and Management, 4(4), 349-367.
63. Zariyawati, M. A. (2009). Working capital management and corporate performance: Case of Malaysia. Journal of Modern Accounting and Auditing, 5(11), 47-54.