IIUM Journal Of Economics and Management/International Journal of Economics, Management and Accounting · 2019 · 15 citations · 19 references
BusinessBusiness EconomicsFinanceFinancial EconometricsFinancial EconomicsWorking Capital ManagementAsset Return ModelingCash Conversion CyclePanel Data MethodsProfitability AnalysisWorking Capital AnalysisWorking Capital ModelingCash Conversion Cycle AnalysisCash Conversion Cycle ManagementEbit MarginGross Profit Margin AnalysisNonlinear EffectsPanel Data EstimationWorking Capital Cycle
This article investigates the relationship between working capital management (WCM) and several profitability measures. We used cash conversion cycle (CCC) and its components as the measure of working capital management and used different profitability ratios such as gross profit margin, EBIT margin, and return on assets (ROA). By using the data from 66 non-financial companies for a four-year period from 2013 to 2016, we performed dynamic panel data analyses. We applied the generalized method of moments (GMM) to test how WCM affects profitability. Results revealed that CCC has nonlinear significant effect on GPM and EBITM, whereas, among its components, only Accounts Payable Days (APD) has significant effect on GPM and EBITM. However, ROA is not influenced by CCC and its components.
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