Title: A meta-analysis of the role of working capital management on firm profitability

Authors: Shakila Yasmin; Md. Mohiuddin

Addresses: Institute of Business Administration, University of Dhaka, Bangladesh ' Institute of Business Administration, University of Dhaka, Bangladesh

Abstract: Working capital management (WCM) is an important function that influences firm performance. Researchers have widely investigated the role of WCM on firm profitability and found diverse results in different contexts. In order to make an overarching conclusion about the role of WCM on firm profitability, this research conducts quantitative meta-analysis of 46 research articles on this topic. One hundred ninety eight regression models and 248 correlation measures have been aggregated by adopting Hunter et al.'s (1982) three-step methodology. Results indicate that profitability is negatively influenced by efficiency and aggressiveness of strategies in relation to WCM. However, liquidity shows positive impact on profitability. Significant moderating and/or control variables include firm size, growth, age, asset intangibility, leverage, firm risk and overall economic growth. Practitioners may use the aggregate model developed by this study in determining the optimum level WCM efficiency, strategies, and liquidity for given states of the moderating and/or control variables.

Keywords: meta-analysis; profitability; working capital management; WCM.

DOI: 10.1504/GBER.2021.118727

Global Business and Economics Review, 2021 Vol.25 No.3/4, pp.400 - 423

Received: 24 Jan 2021
Accepted: 26 Apr 2021
Published online: 03 Nov 2021 *

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