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The purpose of this paper is to investigate the relationship between working capital management and corporate performance with financial constraints.

This study uses large panel sample of Chinese listed firms over the period 2005–2015 using system generalized method of moments (GMM) estimator that controls unobserved heterogeneity of individual firms well and GMM methodology is robust to address endogeneity issues.

Empirical evidence finds inverted U-shaped relationship between working capital and corporate performance and exhibits similar evidence for financially constrained firms. Evidence shows impact of high sales and discounts on early payments at low level of working capital and dominance of opportunity cost and cost of external finance at high level of working capital. The findings of the results show that optimal working capital level of financially constrained firms is relatively lower due to high cost of external capital and debt rationing. The results also indicate that on average NET is significantly lower for firms with Tobin’s Q>1 than firms with Tobin’s Q=1, and suggest that aggressive working capital management is significantly and positively associated with higher corporate values.

This paper is among few that complement the existing literature by providing evidence that inverted U-shaped relationship between working capital management and corporate performance also exists in the context of Chinese listed non-financial firms. Exclusively, the relationship of working capital and corporate performance with linkage of financial constraints is scant in the context of Chinese listed non-financial firms.

This paper aims to examine the influence of cash flow on the relationship between net working capital and firm performance.

The paper uses unbalanced panel data regression analysis on a sample of 6,926 non-financial small and medium enterprises in the UK for the period from 2004 to 2013.

The results indicate a strong concave relationship between net working capital and performance in the absence of cash flow; however, the relationship becomes convex after taking cash flow into consideration. The results further show that firms with cash flow below the sample median exhibit lower investment in working capital, but firms with cash flow above the sample median have higher investment in working capital. The results suggest that managers should consider their firms cash flow when determining the appropriate investment to be made in working capital, so as to improve performance.

Overall, the results suggest that whilst firms with limited cash flow should strive to reduce investment in working capital, firms with available cash flow should increase investment in working capital to improve performance.

This current study incorporates the relevance of cash flow in assessing the association between working capital management and firm performance.

The purpose of this paper is to examine the relationship between working capital efficiency and firm value and the influence of financing constraints on this relationship.

Data from 192 firms spanning a period of ten years (1999-2008) are used for this purpose and analyzed using the ordinary least squares regression technique.

The study finds that improvements in working capital efficiency through reduction in working capital investment results in higher firm value. However, this relationship is influenced by the financing constraints faced by a firm. For financially constrained firms, working capital efficiency significantly increases firm value but it is found to be insignificant for unconstrained firms.

To the author’s knowledge, this is the first study on the value of working capital in Malaysia or in any emerging market. Most studies on working capital valuation concentrate on developed countries and that too are only a handful. Hence this study contributes to the scarce literature on the valuation of working capital. This study also uses the model by Fama and French (1998) to evaluate the relationship between working capital and firm value, which has hardly been used in studies on working capital valuation.

The amount of current assets and the structure of their financing within working capital management define the level of risk, liquidity and profitability of any company. This chapter identifies the type of working capital investment and financing policies and reveals their influence on the financial performance of Czech firms.

The type of investment policy was defined, based on the structure of current assets and the working capital-to-sales ratio, followed by the share of different liabilities in assets, used to determine the financing policy. The Orbis database provided the chapter with indexes of manufacturing, agricultural, construction and trade companies for the period of 2012–2021.

The results obtained revealed the liquidity and financial independence of all selected industries. Flexible investment and conservative financing policies in agriculture were accompanied by low profitability. The decrease of the working capital-to-sales ratio and the attraction of the current debts for assets financing provided a higher return on assets in the manufacturing, agricultural and trade sectors.

This study examines the performance effect of working capital for a large sample of Indian manufacturing firms in light of supply chain disruption, i.e. the COVID-19 pandemic.

This study is based on secondary data collected from the Prowess database on Indian manufacturing firms listed on the Bombay Stock Exchange (BSE) 500. Panel data regression analyses are used to estimate all models. Moreover, this study has employed robust standard errors to consider for heteroscedasticity concerns.

The results challenge the current notion of working capital investment and reveal that higher working capital has a positive and significant impact on firm performance. Further, it highlights that Indian manufacturing firms suffered financially post-COVID-19 as they significantly lack the working capital to run day-to-day operations.

This research contributes to the scant literature by examining the association between working capital financing and firm performance in light of the COVID-19 pandemic, representing typical developing economies like India.

This paper aims to examine the effect of geographical diversification on corporate liquidity in Malaysian firms. Liquidity is represented by both cash and working capital.

Data for this study is collected from a total of 735 firms over a period of five years, from 2010 to 2014, resulting in a total of 2,904 firm-year observations. The effect of geographical diversification on the cash and working capital of the firms is analyzed by using the ordinary least squares (OLS) with standard errors adjusted for firm level clustering and the quantile regression (QR) analyses. Control variables which represent the characteristics of the firms are also considered.

Analysis using the OLS regression technique indicates that geographical diversification has a highly significant positive influence on corporate cash holdings, while the influence of working capital is negative and its significance is only at the 10 per cent level. However, when QR is used to analyze the relationships, it is found that geographical diversification is only significant in positively influencing cash holdings for firms with low cash holdings, but the relationship is insignificant at high levels of cash holdings. Additionally, working capital is significantly influenced by geographical diversification at high levels of working capital but not at low levels.

To the author’s knowledge, this is the first study to analyze the influence of geographical diversification on liquidity by considering both cash and working capital. The effect of diversification on liquidity is mostly studied in developed countries, whereas this study is focused on a developing country. Additionally, this study uses QR to analyze relationships at different levels rather than at aggregate level as done in OLS regression analysis.

This study aims to primarily investigate two vital questions: First, the authors examine whether group-affiliated firms are more (less) financially constrained vis-à-vis standalone firms. The authors estimate working capital investment (WCI) to cash flow sensitivity to understand the nature of financial constraints. Second, the authors further investigate the impact of working capital level on firm values and risks between group-affiliated and standalone firms.

This paper uses balanced panel data set from the year 2012–2019. The authors employ propensity score matching to ascertain comparable firm attributes from business group and standalone firms. This process yields 280 firms (140 in each group) after controlling the firm heterogeneity between these two groups. All the models are estimated using fixed-effect regression.

The authors find that group affiliated firms are less financially constrained than standalone firms. The results show that WCI to cash flow sensitivity is higher in standalone firms vis-a-vis group-affiliated firms, implying that standalone firms are more financially constrained than group-affiliated firms. Second, the authors find that firm values are more sensitive to working capital level in standalone firms versus group-affiliated firms. Furthermore, the authors document that the risk of the standalone firms is less sensitive to working capital level than that of group-affiliated firms.

Most recent studies exploring the role of group affiliation in financing constraints have not controlled for heterogeneity among group-affiliated firms vis-à-vis standalone firms, which may arise due to variation in firm characteristics. Unlike prior studies, this research design ascertains comparable firm attributes between business group and standalone firms, implying firms belonging to these two groups differ by the exogeneous affiliation (business group and standalone firms). The authors document that group-affiliated firms are less financially constrained than standalone firms controlling firm-level heterogeneity between group-affiliated and standalone firms. To the best of the authors' knowledge, no such work has been previously done in general (specifically in India).

This study develops an integrated approach combining data envelopment analysis (DEA) and structural equation modeling (SEM) for estimating the working capital management (WCM) efficiency and evaluating the effects of diverse exogenous variables on the WCM efficiency and firms' performance.

DEA is applied for deriving WCM efficiency for 212 Indian manufacturing firms over a period from 2008 to 2019. Also, the effect of human capital (HC), structural capital (SC), cost of external financing (CEF), interest coverage (IC), leverage (LEV), net fixed asset ratio (NFA), asset turnover ratio (ATR) and productivity (PRD) on the WCM efficiency and firms' performance is examined using SEM.

The average mean efficiency scores ranging from 0.623 to 0.654 highlight the firms operating at around 60% of WCM efficiency only, which is a major concern for Indian manufacturing firms. Further, IC, LEV, NFA, ATR revealed direct effect on the WCM efficiency as well as indirect effect on firms' performance, whereas CEF had only a direct effect on WCM efficiency. HC, SC and PRD had no effects on WCM efficiency and firms' performance.

The findings offer vital insights in guiding policy decisions for Indian manufacturing firms.

This study is the first to identify the endogenous nature of the relationship of HC, SC, CEF, IC altogether with firms' performance, compounded by the WCM efficiency, by applying a comprehensive methodology of DEA and SEM and provides an efficiency performance model for better decision-making.

The purpose of this paper is to empirically investigate the relationship between working capital management (WCM) efficiency and exogenous variables of the Indian manufacturing sector along with its sub-industries that are involved in export activities.

Panel regression (fixed effects) was used on a sample of 563 Indian manufacturing firms involved in export activities, covering a time period from 2008 to 2018.

Industry-wise results showed a significant relation of leverage, net fixed asset ratio, profitability, asset turnover ratio, total asset growth rate and productivity with cash conversion cycle (CCC).

Firstly, having taken a sample from a developing economy, the results of our study may be generalizable only among developing contexts. Secondly, the time period taken in this study (2008–2018) has witnessed several economic fluctuations such as recession and demonetization which might differ for the firms or countries in normal conditions.

An improved working capital model could advance the firms' performance by reducing the CCC of the firm, thereby creating efficiency in WCM. In addition, the results of this study could be helpful for many stakeholders such as working capital managers, debt holders, investors, financial consultants and others for monitoring the firms.

This study contributes to the existing literature in the relation between WCM efficiency and exogenous variables of the Indian manufacturing firms engaged in the export activities. Moreover, this study is one of the few research studies to investigate this relationship among Indian export firms in different industries, thus filling the gap in similar work done in other countries.

The purpose of this paper is to investigate whether non-financial firms listed on the Nairobi Securities Exchange (NSE) exhibit a target cash conversion cycle (CCC). The study also examines the speed of adjustment to the target CCC and the factors that influence corporate decisions on the optimum length of the CCC.

Based on a sample of 33 publicly traded firms on the NSE for the period between 1993 and 2008, cross-sectional and time series analyses were carried out on the data comprising 468 firm-years. A target adjustment model was developed to examine the significant determinants of the CCC. Various regression approaches including ordinary least squares, fixed effects and two-stage least squares estimation models were used in data analysis.

The results, which are robust for endogeneity, show that non-financial firms listed on the NSE maintain a target CCC. Further analysis reveals that these firms adjust to the target CCC at a slower rate. The results show that the determinants of the CCC include both firm-specific and economy-wide factors. Specifically, the study establishes that older firms and firms with more internal resources maintain longer CCC. Moreover higher return on assets, investment in capital expenditure and growth opportunities have a significant negative association with the CCC. The results also show a significant positive relation between inflation and the CCC.

The study establishes that other than internal firm-specific factors, the CCC is also influenced by inflation, which is an external, economy-wide factor.

To the best of the author's knowledge, this is the first study to examine whether listed non-financial firms in a frontier market maintain a target CCC.