Economic downturns and working capital management practices: a qualitative enquiry
Qualitative Research in Financial Markets
ISSN: 1755-4179
Article publication date: 10 June 2021
Issue publication date: 27 July 2021
Abstract
Purpose
This study aims to explore changes in working capital management (WCM) practices in response to economic downturns, especially during the coronavirus pandemic.
Design/methodology/approach
This study adopts an interpretative approach. This paper used semi-structured interviews with 2 finance directors and 13 top managers for data collection. This paper used thematic analysis for analysing the interview data.
Findings
The study findings suggest that the traditional ways of managing working capital may no longer be sufficient during a crisis. Instead, dynamic financing, trade credit policy and continuous staff training to develop new skills are alternative WCM practices to navigate the challenges of a crisis. Further, this paper finds that economic conditions, such as inflation rates, interest rates, exchange rates and government policy, negatively affect WCM.
Practical implications
The study findings highlight practical issues that may help firms meet their present and future financing needs, manage their day-to-day operational activities and enhance performance, both operational and financial. The study is beneficial for regulators in understanding a firm’s constraints during crises and respond appropriately.
Originality/value
This is the first study, to the best of the knowledge that uses a qualitative approach to investigate the impact of economic downturns on WCM practices of firms. Thus, this study offers new insights into the fundamentals of WCM practices during crises.
Keywords
Acknowledgements
The authors are grateful to the editor and the anonymous reviewers for their objective and valuable comments and suggestions throughout the review process.
Citation
Simon, S., Sawandi, N., Kumar, S. and El-Bannany, M. (2021), "Economic downturns and working capital management practices: a qualitative enquiry", Qualitative Research in Financial Markets, Vol. 13 No. 4, pp. 529-547. https://doi.org/10.1108/QRFM-09-2020-0181
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited