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Cited by 1Working Capital and Financial PerformanceSupply Chain and Inventory ManagementFinancial Analysis and Corporate Governance

Working Capital Management and Profitability: Evidence from Indian Listed Firms

Open access
Kanaiyalal Shantilal Parmar·2025·Journal of Information Systems Engineering and Management
DOI 10.52783/jisem.v10i52s.10737
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Abstract

This study investigates the impact of working capital management on firm profitability using financial statement data from Indian listed companies.

AI snapshot

Written from the paper’s full text.

TL;DR

Using an unbalanced panel of 57,138 firm-year observations from Indian listed companies over 2001–2024, the paper examines how working capital components affect return on assets with fixed effects. It finds that longer receivables and inventory periods and longer cash conversion cycles reduce profitability, while longer payables and larger firm size improve it, with leverage reducing it.

Key findings

  • Accounts receivable days and inventory days both have negative coefficients of -0.04 (t = -3.71 and -2.45, respectively, p < 0.01), and the cash conversion cycle has a negative coefficient of -0.05 (t = -2.00, p < 0.05), indicating lower ROA with longer cycles.
  • Accounts payable days have a positive coefficient of 0.03 (t = 1.73, p < 0.10); firm size is positive at 0.03 (t = 4.48, p < 0.01), while leverage is negative at -0.02 (t = -2.60, p < 0.01).
  • Descriptive averages are ROA 11.45%, AR 58 days, inventory 65 days, AP 70 days, and CCC 53 days; the adjusted R² is 0.2475, N = 57,138, and all VIFs are below 2.

Methods

  • Fixed effects panel regression with ROA as the dependent variable; independent variables are AR days, inventory days, AP days, and CCC; controls are firm size (log of total assets) and leverage (long-term debt/total assets); the model includes industry and year fixed effects.
  • Data come from the CMIE Prowess database for Indian listed companies from 2001 to 2024; the unbalanced panel has 57,138 firm-year observations after missing values are removed.
  • Variables are constructed as AR/Sales × 365, Inventory/COGS × 365, AP/Purchases × 365, CCC = AR + inventory − AP, and ROA = PBITDA divided by total assets; VIF is used to check multicollinearity.

Limitations

  • The paper does not explicitly state limitations of its own; it discusses limitations of prior studies instead.
  • Evident from the text: the sample is restricted to Indian listed firms in the CMIE Prowess database, so findings may not generalize to unlisted firms or other countries.
  • Evident from the text: the adjusted R² is 0.2475, and the paper reports VIF and fixed effects but no additional robustness checks for dynamic endogeneity or reverse causality.

Model-written summary. Check it against the paper before relying on it.

Integrity signals

Registry

Crossref · 10.52783/jisem.v10i52s.10737

Cites

19 of 19 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

0 of 19 cited sources checked · 0 supported · 0 flagged

  • Findingown data

    The cash conversion cycle (CCC) has a significant negative impact on ROA.

    “The cash conversion cycle (CCC) is found to have a significant negative impact on ROA.”
    • Also stated in: § Results and Discussion · plain
      “The negative coefficient on the CCC reaffirms that firms benefit from minimizing the duration between cash outflows and inflows.”
    Quote in the paperSubstantial claim
  • Findingown data

    Accounts receivable days negatively affect firm profitability (ROA).

    “Results show that accounts receivable and inventory holding periods negatively affect profitability, while extended accounts payable cycles enhance firm performance.”
    • Also stated in: § Results and Discussion · hedged
      “Specifically, an increase in accounts receivable days leads to a reduction in ROA, indicating cash flow inefficiencies and delayed revenue realization.”
    Quote in the paperSubstantial claim
  • Findingown data

    Accounts payable days positively affect firm profitability (ROA).

    “Results show that accounts receivable and inventory holding periods negatively affect profitability, while extended accounts payable cycles enhance firm performance.”
    • Also stated in: § Results and Discussion · hedged
      “On the other hand, accounts payable have a positive effect, suggesting that firms strategically delay payments to suppliers to finance short-term operations.”
    Quote in the paperSubstantial claim
  • Findingreasoning

    Inventory holding period negatively affects firm profitability (ROA).

    “Results show that accounts receivable and inventory holding periods negatively affect profitability, while extended accounts payable cycles enhance firm performance.”
    • Also stated in: § Results and Discussion · plain
      “Inventory days also negatively impact profitability, as excess inventory may result in higher holding costs and potential obsolescence.”
    Quote in the paperSubstantial claim
  • Interpretationown data

    Firms strategically delay payments to suppliers to finance short-term operations.

    “On the other hand, accounts payable have a positive effect, suggesting that firms strategically delay payments to suppliers to finance short-term operations.”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The fixed effects regression model with the included control variables (firm size and leverage) eliminates confounding, so the estimated relationships between WCM components and ROA are causal.
  • May combine two claims. 9
  • Classified as probably not a substantial claim. 2

  • May combine two claims.

    Interpretationown data

    The findings are extended to a broader, Indian-specific context over a longer timeframe.

    “These findings are consistent with prior work by Deloof (2003) and Raheman and Nasr (2007) but are extended to a broader, Indian-specific context over a longer timeframe.”
    Quote in the paperSubstantial claim0 of 2 sources checked
    • cites Deloof (2003) source
    • cites Raheman and Nasr (2007)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationcitation

    The findings are consistent with prior work by Deloof (2003), Lazaridis and Tryfonidis (2006), Raheman and Nasr (2007), and Sharma and Kumar (2011).

    “The model is statistically robust with significant p-values (mostly below 0.05) and consistent with findings from Deloof (2003), Lazaridis and Tryfonidis (2006), Raheman and Nasr (2007), and Sharma and Kumar (2011).”
    • Also stated in: § Introduction · plain
      “These findings are consistent with prior work by Deloof (2003) and Raheman and Nasr (2007) but are extended to a broader, Indian-specific context over a longer timeframe.”
    Quote in the paperNot a substantial claim0 of 3 sources checked
    • cites Deloof (2003) source
    • cites Lazaridis and Tryfonidis (2006)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Raheman and Nasr (2007)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationown data

    An increase in accounts receivable days indicates cash flow inefficiencies and delayed revenue realization.

    “Specifically, an increase in accounts receivable days leads to a reduction in ROA, indicating cash flow inefficiencies and delayed revenue realization.”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The fixed effects regression model with the included control variables (firm size and leverage) eliminates confounding, so the estimated relationships between WCM components and ROA are causal.

  • May combine two claims.

    Study design and conductown data

    There is no multicollinearity present in the dataset (VIF values below 2 for all variables).

    “As Table 3 shows, the VIF values are below 2 for all variables.Therefore, it is concluded that there is no multicollinearity present in the dataset.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationown data

    Longer payment cycles help firm profitability, provided they do not disrupt supplier relationships.

    “Longer payment cycles also help, provided they do not disrupt supplier relationships.”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The fixed effects regression model with the included control variables (firm size and leverage) eliminates confounding, so the estimated relationships between WCM components and ROA are causal.

  • May combine two claims.

    Interpretationreasoning

    Excess inventory may result in higher holding costs and potential obsolescence.

    “Inventory days also negatively impact profitability, as excess inventory may result in higher holding costs and potential obsolescence.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    In India, many businesses operate in cash-intensive sectors or face structural delays in receivables.

    “In India, many businesses operate in cash-intensive sectors or face structural delays in receivables (Sharma and Kumar (2011)).”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Sharma and Kumar (2011) source

  • Classified as probably not a substantial claim. May combine two claims.

    Premisecitation

    Some studies find a positive association between efficient WCM and profitability, while others find negative effects of CCC on firm performance.

    “Some studies, such as Sharma and Kumar (2011), find a positive association between efficient WCM and profitability, while others, like Gosai and Salim (2022) find negative effects of CCC on firm performance.”
    Quote in the paperSubstantial claim0 of 2 sources checked
    • cites Sharma and Kumar (2011) source
    • cites Gosai and Salim (2022)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisenone given

    Very few prior WCM studies cover firms across multiple sectors or account for firm heterogeneity.

    “Second, very few studies cover firms across multiple sectors or account for firm heterogeneity, which is critical in an emerging market like India.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisecitation

    Many earlier WCM studies focus on narrow time periods or specific industries, rely on conceptual or cross-sectional data, or do not control for firm-level heterogeneity.

    “Many earlier studies focus on narrow time periods or specific industries (Dong, 2010;Teruel and Solano, 2007), rely on conceptual or cross-sectional data (Liu and Wang, 2011;Weinraub and Visscher, 1998), or do not control for firmlevel heterogeneity (Hill, Kelly and Highfield, 2010).”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites Dong, 2010
    • cites Teruel and Solano, 2007

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Liu and Wang, 2011

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

10 of 10

  • The paper relies on this without support.

    The fixed effects regression model with the included control variables (firm size and leverage) eliminates confounding, so the estimated relationships between WCM components and ROA are causal.

    “Following Baltagi (2005) and Wooldridge (2010), the study employs fixed effect panel data regression model including industry and year fixed effects to account for firm-specific heterogeneity and endogeneity.”
    “In doing so, it offers a comprehensive, causally robust, and contextually grounded understanding of how working capital policies affect firm profitability in an emerging economy.”
    “this study contributes new causal evidence to WCM literature.”
1 of 1

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

Each contradiction between two passages listed here was confirmed by an independent check.

  • The regression includes an exact linear combination of its other predictors

    Major

    The paper defines CCC as AR days plus inventory days minus AP days, yet includes all four in the same regression. That makes the predictors perfectly collinear: their separate coefficients cannot be uniquely estimated, and the claim that all VIFs are below 2 cannot hold for this model.

  • Inventory significance marker conflicts with its reported t-statistic

    Minor

    Under a conventional two-sided t-test, a t-statistic of magnitude 2.45 does not meet the stated 1% significance threshold; its two-sided p-value is at least about 0.014. The table nevertheless marks it with three stars.

  • Inventory t-statistic does not match its coefficient and SE

    Minor

    Dividing the reported inventory coefficient by its standard error gives about −2.82, not −2.45. The gap is too large to be explained by rounding the displayed coefficient and SE.

    Reported -2.45 · recomputed -2.816901

3 of 3

Cites

Flagged first, then by citations

Research works printed but not linked: 4

  1. [1]1. Arora, R. (2013). Working capital management and profitability: Evidence from India. Global Journal of Finance and Management, 5(5), 447-454.
  2. [11]11. Kleinbaum, D. G., Kupper, L. L., Muller, K. E., & Nizam, A. (1988). Applied regression analysis and other multivariable methods (Vol. 601). Belmont, CA: Duxbury press.
  3. [13]13. Liu, N., & Wang, D. (2011). Negative working capital management: A concept of supply chain finance. The Journal of Business Perspective, 15(3), 203-210.
  4. [14]14. Mathuva, D. (2010). Influence of working capital components on corporate profitability. Research Journal of Business Management, 4(1), 1-11.

Cited by

Sorted by citations

Related

Authors
Parmar, K. S.
Corresponding author
Kanaiyalal Shantilal Parmar
Venue
Journal of Information Systems Engineering and Management
Publisher
Science Research Society
Published
2025-06-01
Volume
10
Issue
52s
Pages
500-507
ISSN
2468-4376 (ISSN-L)
DOI
10.52783/jisem.v10i52s.10737
OpenAlex
W4411005390
Cited by
0
References
15
FWCI
0.00
Type
journal article
Language
en
Open access
Locations
Journal of Information Systems Engineering & Management (publishedVersion)
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 › Financial Analysis and Corporate Governance
Keywords
working capital management, firm profitability, accounts receivable, inventory holding period, cash conversion cycle, return on assets, Indian listed companies

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Claims read by deepseek-v4.1-flash under definition version 3 (extract-v3) on 2026-10-11.

Classified by jev-1.13-20260917 (gold-guideline-v0.2) on 2026-10-11.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

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