Determinants of working capital: empirical evidence on manufacturing SMEs
ISSN: 0144-3585
Article publication date: 31 March 2021
Issue publication date: 29 March 2022
Abstract
Purpose
This study seeks to analyse the determinants of working capital of manufacturing small and medium-sized enterprises (SMEs), particularly the effect of the probability of financial distress on working capital.
Design/methodology/approach
Using panel data models, the authors analyse a sample of 3994 manufacturing SMEs for the period 2011–2017.
Findings
The results suggest that SMEs pursue conservative working capital management to avoid the failure to fulfil the commitments with creditors. Also, the positive impact of the probability of financial distress on SME working capital suggests that SMEs exposed to a higher probability of bankruptcy invest more in working capital to avoid the risk of default and financing imbalance.
Originality/value
The novelty of this study is to extend the consequences of aggressive or conservative working capital management by analysing the probability of financial distress on working capital.
Keywords
Acknowledgements
The authors knowledge the grateful comments of the anonymous referees.
The authors would like to express their acknowledge to the financial support of the research unit on Governance, Competitiveness and Public Policy – University of Aveiro, and CEFAGE-UBI - The Centre for Advanced Studies in Management and Economics of the University of Beira Interior, both sponsored by the FCT - Portuguese Foundation for the Development of Science and Technology, Ministry of Science, Technology and Higher Education and Science, project (UIDB/04058/2020) and project UIDB/04007/2020, respectively.
Citation
Sardo, F. and Serrasqueiro, Z. (2022), "Determinants of working capital: empirical evidence on manufacturing SMEs", Journal of Economic Studies, Vol. 49 No. 3, pp. 506-521. https://doi.org/10.1108/JES-10-2020-0513
Publisher
:Emerald Publishing Limited
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