The impact of Working Capital Management on firm profitability in different economic cycles: Evidence from the United Kingdom

Tiago Gonçalves, Cristina Gaio and Frederico Robles
Authors registered in the RePEc Author Service: Tiago Cruz Gonçalves (tiago@iseg.ulisboa.pt)

Economics and Business Letters, 2018, vol. 7, issue 2, 70-75

Abstract: Literature shows that Working Capital Management (WCM) affects profitability and liquidity. Economic conditions may stress those relationships, especially during economic downturns. We analyze the effects of economic cycle on the relationship between WCM and profitability, using a sample of UK unlisted companies between 2006 and 2014. We find that WCM efficiency increases profitability. This positive impact is even more important during economic downturns. Our results show multi-level effects of WCM on profitability and liquidity constraints, with varying economic conditions. Results matter economically and managerially and highlight the importance of considering WCM as part of overall corporate financial strategy.

Date: 2018
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:ove:journl:aid:12691

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