Performance, working capital management, and the liability of smallness: A question of opportunity costs?

Vivien Lefebvre

Journal of Small Business Management, 2022, vol. 60, issue 3, 704-733

Abstract: This article studies the relationship between working capital management and firm operating performance and focuses on the moderating effect of size. We use a large sample of 56,221 small, medium, and large firms from France, Germany, and Italy, and our results indicate that the impact of working capital management on performance strongly depends on size. We identify a higher sensitivity of performance to underinvestment in net operating working capital for small firms, but no higher sensitivity to overinvestment. These findings suggest that small firms experience high opportunity costs from lost sales when their net operating working capital is low. Financial constraints and lack of financial management are discussed as potential explanations because both are expressions of the liability of smallness.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1080/00472778.2020.1735252 (text/html)
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:taf:ujbmxx:v:60:y:2022:i:3:p:704-733

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ujbm20

DOI: 10.1080/00472778.2020.1735252

Access Statistics for this article

Journal of Small Business Management is currently edited by Eric Liguori

More articles in Journal of Small Business Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().