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Working Capital Management Matters Profitability of Textile Sector: With GLS Model

Ashfaq Ahmad and Sadia Bano
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Ashfaq Ahmad: School of Management and Economics, Beijing Institute of Technology, China.
Sadia Bano: School of Management and Economics, Beijing Institute of Technology, China.

International Journal of Economics and Empirical Research (IJEER), 2015, vol. 3, issue 11, 543-549

Abstract: Purpose: The purpose of this study is to evaluate the influence of working capital management on firm’s profitability. Textile area in Pakistan is very important and considerable because this area is more productive. That’s why the management of resources and obligations are also important to enhance its productivity. Methodology: We used six year panel data from 2006-2011 of 115 textile KSE listed companies. Return on assets used as a profitability of firm and current assets to total assets ratio and current liabilities to total assets ratio are used for working capital investment policy and working capital financing policy respectively. Firm size and quick ratio are also used to find the impact on firm’s performance. Analysis is based on GLS regression with panel data which provides more accurate results then OLS model. Findings: So, findings show that conservative working capital investment policy has positive influence on firm’s profitability. And aggressive working capital financing policy is also influence the profitability. QR and firm size have also positive relation with profitability. Recommendations: This study is helpful for administrator and policy maker to make decision about working capital management. It is also beneficial for investors and lenders to get accurate information about companies.

Keywords: Working capital management; Profitability; Textile sector (search for similar items in EconPapers)
JEL-codes: E22 (search for similar items in EconPapers)
Date: 2015
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