Impact of working capital management on firm profitability and liquidity: the moderating role of family ownership

Abdullah, Muhammad Arsalan Hashmi and Muhammad Sikander Iqbal

Accounting Research Journal, 2022, vol. 35, issue 5, 676-697

Abstract: Purpose - This study aims to analyze whether family ownership and working capital management (WCM) affect firm profitability and liquidity. Further, we also investigate the moderating effect of family ownership on the association between WCM, firm profitability and liquidity. Design/methodology/approach - This study uses a sample of 150 nonfinancial companies listed on the Pakistan Stock Exchange for the period 2014–2019. For empirical analysis, this study used multiple proxies of family ownership and applied robust and bootstrapped quantile regression models. Findings - The results suggest that family ownership has a negative association with firm profitability and liquidity. Moreover, this study finds a positive association between WCM and firm profitability and liquidity. Furthermore, the results indicate that family ownership negatively moderates the association between WCM and firm profitability. In addition, we argue that family ownership rescinds the impact of WCM as excess liquidity may be used for extracting private benefits and related party transactions. Originality/value - First, this study has examined the nexus between family ownership, WCM, firm profitability and liquidity in the context of a developing country, i.e. Pakistan. Second, previous studies have not analyzed the moderating role of family ownership in the association between working capital management, firm profitability and liquidity. Third, this study provides unique evidence that family-owned firms have an adverse liquidity position as compared with other firms.

Keywords: Cash conversion cycle; Firm profitability; Working capital management; Family ownership; Firm liquidity (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-07-2021-0212

DOI: 10.1108/ARJ-07-2021-0212

Access Statistics for this article

Accounting Research Journal is currently edited by Professor Reza Monem

More articles in Accounting Research Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().