How Does Efficient Working Capital Management Impact a Firm’s Fundamentals? Evidence from India

Abstract

This article aims to empirically examine the influence of working capital management (WCM) efficiency on the fundamentals of Indian listed firms. The fixed-effects logit regression model is employed to explore the impact of WCM efficiency on the fundamental strength of the sample firms. The fixed-effects regression model is used to investigate the influence of WCM efficiency on the select individual fundamental measures. We have extracted data from 538 Indian listed firms from the Centre for Monitoring Indian Economy (CMIE) database from 2012 to 2020. We find that WCM efficiency positively influences the fundamental strength of the sample firms. We have also validated our results with respect to individual fundamental measures. We observe that an efficient WCM enhances the overall profitability, operational effectiveness, asset utilization efficiency and the ability to generate cash from operations, while inefficient management of working capital (WC) pushes firms towards a more long-term debt financing in the Indian context.

Nexus Between Working Capital Management (Wcm) and Firm Performance: Empirical Evidence From Manufacturing Sector of Pakistan Using GMM Approach

“…This result is consistent with the findings by (Deloof, 2003;Nadeem Iqbal, 2013;Daniel Mogaka Makori & Ambrose Jagongo, 2013;. However, few researchers showed contradictory results Kumar 2011;Asif Iqbal and Wang Zhuquan 2014).…”

“…Working capital and the performance of a firm Several studied validate the relationship between working capital and performance of the firm. "The WCM and profitability show a positive relationship" (Kumar, 2011;Ali, 2011;Le, 2019). A conservative WCM negatively affects firm performance (Zanxin Wang, 2020).…”

“…Cash Conversion Cycle and the performance of a firm According to (Tryfonidis, 2006;Nadeem Iqbal, 2013) CCC significantly affects the profitability of firms. According to Kumar (2011) and Akinlo (2011) the result shows the positive value of CCC of the coefficient. "This implies that a decrease in the cash conversion cycle will generate lesser profits for a company.…”

Efisiensi Modal Kerja, Agresivitas Pendanaan Modal Kerja, Efisiensi Persediaan, dan Kinerja Operasi Perusahaan di Indonesia

“…Penelitian terdahulu mengenai hubungan antara efisiensi modal kerja (menggunakan proksi siklus konversi kas) dan kinerja perusahaan menunjukkan temuan yang berbeda. 910111213 Kumar et al, (2022), Yazdanfar dan Öhman (2014), Raheman dan Nasr (2007) dan García-Teruel et al, (2007) menemukan bahwa ada hubungan negatif antara siklus konversi kas dan profitabilitas perusahaan. Artinya, penurunan siklus konversi kas akan menghasilkan profit yang lebih tinggi.…”