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Article
Publication date: 30 May 2023

Pushpesh Pant, Pradeep Rathore, Krishna kumar Dadsena and Bhaskar Shandilya

This study examines the performance effect of working capital for a large sample of Indian manufacturing firms in light of supply chain disruption, i.e. the COVID-19 pandemic.

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Abstract

Purpose

This study examines the performance effect of working capital for a large sample of Indian manufacturing firms in light of supply chain disruption, i.e. the COVID-19 pandemic.

Design/methodology/approach

This study is based on secondary data collected from the Prowess database on Indian manufacturing firms listed on the Bombay Stock Exchange (BSE) 500. Panel data regression analyses are used to estimate all models. Moreover, this study has employed robust standard errors to consider for heteroscedasticity concerns.

Findings

The results challenge the current notion of working capital investment and reveal that higher working capital has a positive and significant impact on firm performance. Further, it highlights that Indian manufacturing firms suffered financially post-COVID-19 as they significantly lack the working capital to run day-to-day operations.

Originality/value

This research contributes to the scant literature by examining the association between working capital financing and firm performance in light of the COVID-19 pandemic, representing typical developing economies like India.

Details

International Journal of Productivity and Performance Management, vol. 73 no. 4
Type: Research Article
ISSN: 1741-0401

Keywords

Available. Open Access. Open Access
Article
Publication date: 26 October 2020

Osama EL-Ansary and Heba Al-Gazzar

This paper aims to investigate the possible non-linear effect of net working capital (NWC) level on profitability for Middle East and North Africa (MENA) region listed companies…

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Abstract

Purpose

This paper aims to investigate the possible non-linear effect of net working capital (NWC) level on profitability for Middle East and North Africa (MENA) region listed companies. Furthermore, the study tests the possible interactive effect of cash levels on the relationship between NWC and profitability.

Design/methodology/approach

NWC level is the independent variable and profitability is the dependent variable using two proxies, return on assets (ROA) and returns on equity (ROE). Control variables are size, leverage, gross domestic product growth and sales revenue growth. The generalized method of moments was used to analyze the data of 134 consumer-goods listed firms in 12 MENA countries for the period 2013–2019.

Findings

The results demonstrate that NWC levels had a non-linear effect on profitability using ROA as a profitability proxy while results were insignificant using ROE as a profitability proxy. Furthermore, results show the absence of interactive effects between NWC, cash levels and both profitability proxies.

Originality/value

The study fills a gap in the working capital management (WCM) literature by providing new evidence on WCM’s non-linear effect of corporate performance in the MENA region emerging markets using the consumer-goods industry sample. The study contributes to the financial managers’ working capital optimization efforts in the MENA region by providing evidence on the usefulness of WC optimization efforts in the region from a financial performance point of view. According to the researchers’ knowledge, a few studies attempted to investigate this non-linear relationship for neither MENA region countries nor the consumer-goods industry.

Details

Journal of Humanities and Applied Social Sciences, vol. 3 no. 4
Type: Research Article
ISSN:

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Article
Publication date: 13 March 2019

Altaf Ahmad, Ranveer Kumar and Anil Kumar

This paper aims to identify an inhibitor to protect rebar corrosion in concrete.

211

Abstract

Purpose

This paper aims to identify an inhibitor to protect rebar corrosion in concrete.

Design/methodology/approach

The authors use the simple method of polarization and calculate the change in open-circuit potential and corrosion current density.

Findings

Sodium molybdate is an efficient inhibitor compared with sodium tungstate for rebar corrosion in concrete.

Research limitations/implications

This paper has limitation of 0.0001 M concentration of inhibitors for 400 days of exposure in 3.5 per cent sodium chloride solution.

Originality/value

The research focused on the concentration of both inhibitors in the range from 0.1 to 0.0001 M, which resulted in greater structural protection from corrosion in adverse conditions, such as coastal areas.

Details

Anti-Corrosion Methods and Materials, vol. 66 no. 3
Type: Research Article
ISSN: 0003-5599

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Article
Publication date: 1 February 2023

Sakti Ranjan Dash, Maheswar Sethi and Rabindra Kumar Swain

The purpose of this paper is to examine the impact of working capital management (WCM) on profitability under different financial conditions (constraint/unconstraint) and WCM…

991

Abstract

Purpose

The purpose of this paper is to examine the impact of working capital management (WCM) on profitability under different financial conditions (constraint/unconstraint) and WCM policy (aggressive/conservative). Furthermore, the study investigates the existence of optimal working capital levels under different financial conditions and WCM policy.

Design/methodology/approach

Two-step system generalized method of moments and fixed effect models are used to analyze the data collected from Prowess database from 2011 to 2020 for a sample of 1,104 Indian manufacturing companies.

Findings

The study finds an inverted U-shaped relationship between working capital and profitability in all financial conditions and working capital policy. This finding advocates the existence of an optimal level of working capital that equates the costs and benefits of holding working capital to maximize the companies’ profitability. However, holding working capital beyond the optimal level negatively affects profitability. Companies under financial constraints with aggressive working capital policies have the lowest optimal cash conversion cycle (CCC). Furthermore, the relationship of working capital with profitability and the optimal CCC varies owing to firm age and industry group.

Originality/value

To the best of the authors’ knowledge, this is the first paper that incorporates the impact of working capital on firm’s performance from both financial constraint (unconstraint) and aggressive (conservative) working capital policy perspectives in the Indian context. Furthermore, this study also contributes in terms of reflecting the effect of firm age and industry in determining the optimum CCC of the firms.

Details

Journal of Indian Business Research, vol. 15 no. 3
Type: Research Article
ISSN: 1755-4195

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Article
Publication date: 7 April 2022

Prince Bhatia and Prasenjit Chakrabarti

This study aims to primarily investigate two vital questions: First, the authors examine whether group-affiliated firms are more (less) financially constrained vis-à-vis

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Abstract

Purpose

This study aims to primarily investigate two vital questions: First, the authors examine whether group-affiliated firms are more (less) financially constrained vis-à-vis standalone firms. The authors estimate working capital investment (WCI) to cash flow sensitivity to understand the nature of financial constraints. Second, the authors further investigate the impact of working capital level on firm values and risks between group-affiliated and standalone firms.

Design/methodology/approach

This paper uses balanced panel data set from the year 2012–2019. The authors employ propensity score matching to ascertain comparable firm attributes from business group and standalone firms. This process yields 280 firms (140 in each group) after controlling the firm heterogeneity between these two groups. All the models are estimated using fixed-effect regression.

Findings

The authors find that group affiliated firms are less financially constrained than standalone firms. The results show that WCI to cash flow sensitivity is higher in standalone firms vis-a-vis group-affiliated firms, implying that standalone firms are more financially constrained than group-affiliated firms. Second, the authors find that firm values are more sensitive to working capital level in standalone firms versus group-affiliated firms. Furthermore, the authors document that the risk of the standalone firms is less sensitive to working capital level than that of group-affiliated firms.

Originality/value

Most recent studies exploring the role of group affiliation in financing constraints have not controlled for heterogeneity among group-affiliated firms vis-à-vis standalone firms, which may arise due to variation in firm characteristics. Unlike prior studies, this research design ascertains comparable firm attributes between business group and standalone firms, implying firms belonging to these two groups differ by the exogeneous affiliation (business group and standalone firms). The authors document that group-affiliated firms are less financially constrained than standalone firms controlling firm-level heterogeneity between group-affiliated and standalone firms. To the best of the authors' knowledge, no such work has been previously done in general (specifically in India).

Details

Managerial Finance, vol. 48 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 17 March 2022

Imad Jabbouri, Harit Satt, Oumaima El Azzouzi and Maryem Naili

This study aims to examine the impact of working capital management (WCM) on firm performance. The authors pursue innovation by exploring how the level of financial constraints…

429

Abstract

Purpose

This study aims to examine the impact of working capital management (WCM) on firm performance. The authors pursue innovation by exploring how the level of financial constraints shapes the impact of WCM on corporate performance.

Design/methodology/approach

In this study, the generalized method of moments (GMM) is used to analyze a sample of 753 firms listed on ten Middle East and North Africa (MENA) emerging markets.

Findings

The authors' empirical analysis demonstrates that financially constrained firms are coerced to adopt an aggressive WCM approach to reduce investment in working capital, minimize financing costs and improve financial performance despite the risks associated with this strategy. Contrarily, financially unconstrained firms, uphold a high level of investments in working capital to grow sales and improve financial performance. The authors' results strongly reject the “one size fits all” approach of WCM. The authors assert that the degree of financial constraints largely defines the firm's optimal WCM approach.

Practical implications

The authors' study reveals to financial managers the importance of adopting an appropriate WCM strategy that fits firm-specific characteristics and financial flexibility. The authors' results urge policy makers to ease access to financing to all firms to enhance both their financial flexibility and ability to respond efficiently to emerging investment opportunities as well as develop resilience to economic slumps.

Originality/value

To the best knowledge of the authors, this is the first study that explores WCM and financial constraints in MENA emerging markets.

Details

Journal of Economic and Administrative Sciences, vol. 40 no. 5
Type: Research Article
ISSN: 2054-6238

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Article
Publication date: 14 September 2023

Hang Thi Ngo and Ha Ngan Duong

This study explores the impacts of Covid-19 on the performance of firms operating in different industries, and further discovers suspected impacting channels through which…

409

Abstract

Purpose

This study explores the impacts of Covid-19 on the performance of firms operating in different industries, and further discovers suspected impacting channels through which Covid-19 is significantly associated with firm performance.

Design/methodology/approach

A dataset of 402 listed firms from 2017Q1 to 2021Q4 is proceeded with high dimensional fixed effect (firm-quarter fixed effects) models and difference-in-difference models supported by propensity score matching. A thorough robustness testing procedure with a falsification test with a hypothetical event is applied.

Findings

The study asserts that the pandemic has remarkably hurt the businesses in industries that are more vulnerable to the coronavirus and governmental response policies. Adding to the confirmation of sales and expense channels, new channels – competition and short-term receivables –through which the negative impact of the pandemic is passed on firms is also examined.

Originality/value

First, this study is to be the first comprehensively investigate and affirm the varying impact of Covid-19 on the business performance of listed firms from different industries in Vietnam, providing additional insight into this research field in Vietnam and emerging economies. Second, the authors examine possible channels paving the way for the impact of Covid-19 on firms' performance and especially explore new channels associated with competition and short receivables. Third, the findings help to form the recommendations for Vietnamese firms, and the study could be replicated for other emerging countries under other similar infectious diseases-driven crises.

Peer review

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2023-0072

Details

International Journal of Social Economics, vol. 51 no. 4
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 12 July 2023

Imad Jabbouri, Yassine Benrqya, Harit Satt, Maryem Naili and Kenza Omari

This study examines the impact of firm-specific and macroeconomic factors on the working capital behavior of firms listed in the Middle East and North African (MENA) region.

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Abstract

Purpose

This study examines the impact of firm-specific and macroeconomic factors on the working capital behavior of firms listed in the Middle East and North African (MENA) region.

Design/methodology/approach

This study is based on a panel data analysis of 687 firms listed on 11 MENA markets, carried out using the Generalized Method of Moments (GMM) approach.

Findings

The results of this study reveal that profitable firms with high levels of operating cash flows adopt a conservative working capital management. Young firms with rapid growth rates, highly leveraged firms and firms with large investments in fixed assets have higher liquidity needs, which explains their tendency to pursue aggressive working capital strategies. Similarly, large firms exercise their bargaining power over their clients and suppliers to implement an aggressive approach of working capital management. Finally, firms do not have the luxury to decide how working capital should be managed when they are subject to outside macroeconomic forces that affect their stakeholders as well.

Practical implications

The findings of this study can help managers adopt efficient practices and identify optimal working capital levels. Firms in the MENA region maintain excess reserves of cash, which causes under-investment and inefficient allocation of resources in the economy. Improving working capital management practices can allow firms to regain operational efficiency, enhance financial performance and support economic growth.

Originality/value

To the best of the authors' knowledge, this study investigates this topic in MENA emerging markets and contributes to enriching the existing corporate finance literature in emerging markets.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2054-6238

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Article
Publication date: 25 December 2023

Ilker Yilmaz and Haitham Nobanee

This article examines the relationship between the cash conversion cycle (CCC) and profitability in countries in the Middle East and North Africa (MENA) region.

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Abstract

Purpose

This article examines the relationship between the cash conversion cycle (CCC) and profitability in countries in the Middle East and North Africa (MENA) region.

Design/methodology/approach

The authors used dynamic panel methodology to analyze a dataset consisting of 395 firms from nonfinancial sectors in the MENA countries from 2013 to 2018. The authors developed several models consisting of different measures of profitability, CCC and the components of CCC. The control variables were used in the models at different levels.

Findings

The results bring out a significantly positive relationship between the CCC and profitability. However, mixed results have been obtained for industry and country details. The quadratic model revealed an inverted U-shaped relationship and the presence of an optimal point of CCC. The robustness checks have confirmed the results of the main models.

Practical implications

The results of the study imply that corporate managers and policymakers ought to pay equal attention to the components of CCC when developing working capital policies and be aware of the optimal level of CCC.

Originality/value

This paper handles the endogeneity problem that is inherent in the relationship. It investigates and confirms the nonlinear characteristics of the relationship. To the best of the authors' knowledge, this study is the first to use dynamic panel models to examine the CCC and its relationship with profitability in the MENA context.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 6 February 2023

Zagdbazar Davaadorj, Bolortuya Enkhtaivan and Jamie Weathers

The paper aims to investigate the imprinting effect on working capital (WC) management as higher-level managers' transition to chief executive officer (CEO) positions. This paper…

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Abstract

Purpose

The paper aims to investigate the imprinting effect on working capital (WC) management as higher-level managers' transition to chief executive officer (CEO) positions. This paper proposes that WC management defined as a shorter cash conversion cycle (CCC) can be carried forward to the new firm when the managers are appointed as a CEO.

Design/methodology/approach

The authors employ a multivariate regression approach. The data in this study come from two sources: Execucomp which provides data for corporate managers of the largest 2,000 USA firms including S&P 1,500 US and Compustat which provides financial information of firms.

Findings

The authors find a positive imprinting effect of “new” CEOs on WC outcomes – proxied by the CCC. CCC shortens by approximately 16 days when CEOs are efficient managers at previous institutions, predominantly derived from improvements in inventory and payables. The effect is sensitive to individuals' age, familiarity with the industry and high-pressure circumstances.

Practical implications

The paper includes important implications of WC management for firms to consider, especially during economic crises when liquidity management is a priority.

Originality/value

This paper extends the literature on the imprinting effect on managerial decision-making. The paper offers evidence of cooperative yet dynamic efforts in managing WC during CEO turnover events, which are unique findings.

Details

International Journal of Managerial Finance, vol. 19 no. 5
Type: Research Article
ISSN: 1743-9132

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