Working capital as a firm performance savior? Evidence from Scandinavian countries

M. Kabir Hassan, Ahmet Faruk Aysan, Umar Nawaz Kayani and Tonmoy Choudhury

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This study examined the relationship between working capital management (WCM) and firm performance in Scandinavian markets from 2007 to 2020. The initial data set comprised 8821 observations; only 5331 yearly observations remained after data filtration. The data are extracted from a reliable Bloomberg database. This empirical study adopts a multiple regression analysis for unbalanced panel data on Scandinavian markets, reporting an inverse relationship between WCM and firm performance measured through return on assets, gross operating income, and market-to-book value ratio. The control variables also showed a significant relationship order. To assess the robustness of our baseline regression results, we considered various indicators, (i) including alternative measures of firm performance, (ii) excluding the 2008 global financial crisis period, and (ii) running all countries in one equation as a group analysis. This study adds to the existing literature and outlines how efficient WCM can help managers to improve firm performance.

Keywords: Working capital management; Scandinavian markets; Firm performance; Large dataset; Endogeneity (search for similar items in EconPapers)
JEL-codes: G14 G31 G41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000855

DOI: 10.1016/j.ribaf.2023.101959

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