Working capital, cash flow and profitability of intensive MSMEs: evidence from Ecuador
Journal of Entrepreneurship in Emerging Economies
ISSN: 2053-4604
Article publication date: 22 August 2022
Issue publication date: 7 February 2024
Abstract
Purpose
The purpose of this research is to examine Micro-, small- and medium-sized enterprises (MSMEs). Which have limited access to financial resources from financial intermediaries. Thus, resource allocation is a primary concern for them.
Design/methodology/approach
This research studies the determinants of cash conversion cycle components and cash flow of MSMEs operating in Ecuador. This study examined a robust sample of 19,680 firms from 2000 to 2020, using the two-step generalized methods of moments to control for endogeneity and multicollinearity of independent variables issues.
Findings
The sample was divided into working capital intensive and fixed capital intensive firms. It was found that in every segment (micro-, small- and medium-sized), the majority of firms are working capital intensive and their average return is higher. This implies that small business owners assign the majority of their resources to current assets, which thus far have enabled them to achieve higher profitability.
Originality/value
Research investigated Ecuadorian MSMEs in a dollarized developing environment. Scrutinizing working capital intensive vs fixed capital intensive.
Keywords
Acknowledgements
Funding: This research was partially financed by State University of New York (SUNY) at New Paltz. The authors are grateful for the financial and academic support of this institution.
Citation
Briones, O.F., Camino-Mogro, S.M. and Navas, V.J. (2024), "Working capital, cash flow and profitability of intensive MSMEs: evidence from Ecuador", Journal of Entrepreneurship in Emerging Economies, Vol. 16 No. 2, pp. 396-417. https://doi.org/10.1108/JEEE-01-2022-0003
Publisher
:Emerald Publishing Limited
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