The Impact of Working Capital Management on Firms Financial Performance: Evidence from Pakistan

Tanveer Bagh (), Muhammad Imran Nazir, Muhammad Asif Khan, Muhammad Atif Khan and Sadaf Razzaq
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Muhammad Imran Nazir: Department of Economics and Finance Mohammad Ali Jinnah University, Islamabad, Pakistan,
Muhammad Atif Khan: Department of Commerce, University of Kotli, Azad Jammu and Kashmir, Pakistan
Sadaf Razzaq: Department of Human Resource Management, University of Management Sciences and Information Technology Kotli, Pakistan.

International Journal of Economics and Financial Issues, 2016, vol. 6, issue 3, 1097-1105

Abstract: The purpose of this study was to empirically explore the impact of working capital management (WCM) on firms performance of chosen manufacturing firms listed in Karachi stock exchange (KSE). The quantitative research methods, correlation matrix and multiple regressions, secondary data and purposive sampling have been worked out. Arandom sample of 50 listed non-financial companies on Pakistani Stock Market was selected for the period ranging from year 2005 to 2014. The WCM has been used as an independent variable, i.e., inventory turnover (ITO), cash conversion cycle (CCC), average collection period (ACP), and average payment period (APP). The firm performance (FP) has been used as dependent variable, i.e., return on asset (ROA), return on equity (ROE) and earning per share (EPS). The results of multiple regression articulated that the APP, ITO and CCC have negative and significant impact on ROA but ACP has positive and significant impact on ROA. While APP has negative significant impact on ROE. The ITO has negative significant impact on EPS while ACP has positive and statistically significant impact on. The study results advocated that the FP of selected firms is influenced by WCM. By validating the findings with previous researchers, this endeavor will contribute to the literature. It will be beneficial to the academic, social and practical deportment. The study findings endowed with deeper insights into WCM practices and present recommendations that in turn bring improvements in the FP of the targeted firms.

Keywords: Working Capital; Working Capital Management; Financial Performance; Pakistan (search for similar items in EconPapers)
JEL-codes: C10 C30 D73 E37 F65 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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