The impact of working capital management onfirm profitability in different business cycles: evidence from Finland
2014 (English)In: Research In International Business and Finance, ISSN 0275-5319, Vol. 32, 36-49 p.Article in journal (Refereed) Published
The recent economic downturn of 2007–2008 has brought renewed focus on working capital policies. In this paper we examine the role of business cycles on the working capital–profitability relationship using a sample of Finnish listed companies over an 18-year period. We find the impact of business cycle on the working capital–profitability relationship is more pronounced in economic downturns relative to economic booms. We further show that the significance of efficient inventory management and accounts receivables conversion periods increase during periods of economic downturns. Our results demonstrate that active working capital management matters and, thus, should be included in firms’ financial planning.
Place, publisher, year, edition, pages
Elsevier, 2014. Vol. 32, 36-49 p.
Business cycles; Working capital; Profitability
Research subject Business Administration
IdentifiersURN: urn:nbn:se:su:diva-103488DOI: 10.1016/j.ribaf.2014.03.005OAI: oai:DiVA.org:su-103488DiVA: diva2:718100