The Effect of Working Capital Management on Firm’s Profitability: Empirical Evidence from an Emerging Market

Authors

  • Melita Stephanou Charitou University of Nicosia
  • Maria Elfani University of Nicosia
  • Petros Lois University of Nicosia

Keywords:

business, economics research, Capital Markets, Working Capital Management, Empirical

Abstract

In this study, we empirically investigate the effect of working capital management on firm’s financial performance in an emerging market. We hypothesize that working capital management leads to improved profitability. Our data set consists of firms listed in the Cyprus Stock Exchange for the period 1998-2007. Using multivariate regression analysis, our results support our hypothesis. Specifically, results indicate that the cash conversion cycle and all its major components; namely, days in inventory, days sales outstanding and creditors payment period - are associated with the firm’s profitability. The results of this study should be of great importance to managers and major stakeholders, such as investors, creditors, and financial analysts, especially after the recent global financial crisis and the latest collapses of giant organizations worldwide.

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Published

2016-06-30

How to Cite

Charitou, M. S., Elfani, M., & Lois, P. (2016). The Effect of Working Capital Management on Firm’s Profitability: Empirical Evidence from an Emerging Market. Journal of Business & Economics Research, 14(3). Retrieved from https://journals.klalliance.org/index.php/JBER/article/view/187

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Section

Articles