The impact of Working Capital Management on firm profitability in different economic cycles: Evidence from the United Kingdom
Open accessAbstract
Literature shows that Working Capital Management (WCM) affects profitability and liquidity. Economic conditions may stress those relationships, especially during economic downturns. We analyze the effects of economic cycle on the relationship between WCM and profitability, using a sample of UK unlisted companies between 2006 and 2014. We find that WCM efficiency increases profitability. This positive impact is even more important during economic downturns. Our results show multi-level effects of WCM on profitability and liquidity constraints, with varying economic conditions. Results matter economically and managerially and highlight the importance of considering WCM as part of overall corporate financial strategy.
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Cites
Does Working Capital Management Affect Profitability of Belgian Firms?
Deloof, M. (2003) · Journal of Business Finance & Accounting · doi:10.1111/1468-5957.00008 · Cited by 1,849 · see citing works
Is working capital management value-enhancing? Evidence from firm performance and investments
Aktas, N., Croci, E., & Petmezas, D. (2015) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2014.12.008 · Cited by 534 · see citing works
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Research works printed but not linked: 4
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Habib, A. M., & Dalwai, T. (2024) · Journal of the knowledge economy · doi:10.1007/s13132-023-01138-7 · Cited by 99 · see citing works
“…studies have investigated the relationship between IC and WCM efficiency with a firm's performance; for example, Chamberlain and Aucouturier (2021); Gonçalves et al. (2018); Hamdan (2018); Isola et al. (2020); Kabuye et al. (2019); Kweh et al. (2021); Louw et al. (2019); Lyngstadaas (2020); Nadeem…”
Impact of working capital management on profitability: evidence from listed companies in Qatar
Aldubhani, M. A. Q., Wang, J., Gong, T., & Maudhah, R. A. (2022) · Journal of Money and Business · doi:10.1108/jmb-08-2021-0032 · Cited by 80 · see citing works
Economic downturns and working capital management practices: A qualitative enquiry
Simon, S., Sawandi, N., Kumar, S., & El-Bannany, M. (2021) · Qualitative Research in Financial Markets · doi:10.1108/qrfm-09-2020-0181 · Cited by 25 · see citing works
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- Authors
- Gonçalves, T., Gaio, C., & Robles, F.
- Affiliations
- University of Lisbon (PT)
- Venue
- Economics and Business Letters
- Publisher
- Universidad de Oviedo
- Published
- 2018-07-09
- Volume
- 7
- Issue
- 2
- Pages
- 70
- ISSN
- 2254-4380 (ISSN-L)
- OpenAlex
- W2891570067
- Cited by
- 54
- References
- 2
- Citations by year
- 2026: 3 · 2025: 2 · 2024: 13 · 2023: 12 · 2022: 12 · 2021: 5 · 2020: 6 · 2019: 1
- FWCI
- 8.83
- Type
- journal article
- Language
- en
- Open access
- diamond
- doi.org
- Licence
- cc-by-nc-nd
- Locations
- Economics and Business Letters (publishedVersion, cc-by-nc-nd)
- RePEc: Research Papers in Economics (submittedVersion)
- Dialnet (Universidad de la Rioja) (submittedVersion)
- Funders
- Fundação para a Ciência e a Tecnologia (UID/SOC/04521/2013)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
- Social Sciences › Business, Management and Accounting › Management Information Systems › Supply Chain and Inventory Management
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Keywords
- working capital management, firm profitability, business cycles, economic downturn, liquidity constraints, non-listed companies, corporate financial strategy, United Kingdom
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