Evaluating the Super-Efficiency of Working Capital Management Using Data Envelopment Analysis: Does COVID-19 Matter?

Abstract

This study evaluates the working capital management (WCM) super-efficiency in UAE firms and determines how the COVID-19 crisis may affect WCM super-efficiency from a statistical perspective. Data envelopment analysis (DEA), difference tests, and Tobit regression techniques are used. Integration of DEA with Tobit regression is required to recognize the potential statistical consequence of COVID-19 on the super-efficiency of WCM. The results show that WCM super-efficiency is moderate and requires decision-makers' corrective measures to attain best practices. The study results show no significant difference in WCM super-efficiency, and COVID-19 does not significantly influence WCM super-efficiency. The results would rouse decision-makers' interests, who would look into the firm's efficiency and weak spots. They would then take major steps to improve efficiency and achieve the best practices. Stakeholders such as managers, financiers, and investors may need these results to monitor how firms manage their assets and liabilities. We contribute to the literature by investigating and evaluating firms' WCM super-efficiency pre and post the COVID-19 pandemic employing a unique technique based on DEA super-efficiency and examining whether COVID-19 has affected WCM super-efficiency to extend the scope of knowledge and stressing the importance of sound WCM, especially in periods of economic distress.

Analyzing the market performance of Romanian firms: do the COVID-19 crisis and classification type matter?

“…These results are compatible with Habib and Mourad (2023) findings, which reveal significant differences in U.S. firms' performance before and during the COVID-19 pandemic. In contrast, the results are incompatible with (Habib and Kayani, 2023;Habib and Mourad, 2022), as Habib and Kayani (2023) revealed no significant difference in UAE firms' performance before and during COVID-19, and Habib and Mourad (2022) revealed no significant difference in Gulf firms' performance before and during COVID-19.…”

“…The Mann-Whitney U test is a statistical test that falls under the category of nonparametric tests. It is commonly employed to compare the means of two groups derived from a shared population (Habib and Dalwai, 2023;Habib and Kayani, 2023;Habib and Mourad, 2023a). This study uses the Mann-Whitney U test to check the null hypothesis that Romanian firms' performance distribution is the same before and during the COVID-19 crisis.…”

“…These abnormal events impact the firm performance (Habib and Mourad, 2023a;Ho et al, 2021;Škare et al, 2021). The uncertainty generated by COVID-19 at the national and international levels, as well as at the stock market level, was very high, so the capital market experienced a bearish trend, especially for some sectors; researchers using different approaches to evaluate the effects (Aslam et al, 2022;Habib and Kayani, 2023;He and Li, 2022;Jabeen et al, 2022). After regulatory and financial government intervention, some sectors started to recover from the initial peaks, and the demand tailwinds were also endorsed by all those measures.…”

Does working capital management improve financial performance in China’s agri-food sector during COVID-19? A comparison with the 2008 financial crisis

“…Hamshari et al [ 80 ] argued that COVID-19 leads to the decline in WC performance, and a conservative WCM method is appropriate for most companies during the COVID-19 period. However, Habib and Kayani [ 81 ] concluded that COVID-19 does not significantly affects the efficiency of WCM. A Romanian study showed that NWC increases in 2020 compared to 2019 and it positively impacts corporate performance [ 82 ].…”

Do business strategies and environmental, social, and governance (ESG) performance mitigate the likelihood of financial distress? A multiple mediation model

“…Considering this philosophy, business strategy is aligned with the theory of the firm, as the firm is seen as a cluster of complementary attributes, including the concentration of decision rights over productive assets, regulation of managerial hierarchies, employment contracts, and the use of incentives and implicit agreements to regulate transactions [ 12 ]. From this perspective, a firm can efficiently allocate resources to enhance its performance and achieve competitive advantages [ [13] , [14] , [15] ]. In addition, there are numerous other conceptualizations of the nature of the firm, some based on notions of firms as specialized collections of heterogeneous resources [ [16] , [17] , [18] ], some based on behavioral theory [ 19 , 20 ], while others emphasize the nature of firms as knowledge-based and learning entities [ [21] , [22] , [23] ].…”