Working Capital Management and Firm Performance

Muhammad Ahmad, Rohani Rohani Md-Rus

Abstract


This study examines the relationship between working capital management and firm’s performance in Pakistan. Data used in this study is based on 199 non-financial listed firms for 2006-2016. This study uses three proxies to measure the working capital management, namely, ICP, ACP and APP. To fill the gap in existing literature, this study uses both accounting-based (ROA) and market based (Tobins’ Q) measures of firm performance. According to the results, ICP, ACP and APP negatively influence the ROA while ICP and APP positively and ACP negatively influence the Tobins’Q. The relationships remain same when two controls firm age and firm size are added into model. The results of this study are useful for the financial managers of firms in Pakistan and other developing countries.

Keywords


Working capital management; firm performance; emerging markets; Pakistan

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References


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