Working Capital Financing and Corporate Profitability of Pakistan Manufacturing Firms: Evidence from FMCG, Cement & Chemical Sector

Abdullah, S. and Siddiqui, D. A. (2019). Working Capital Financing and Corporate Profitability of Pakistan Manufacturing Firms: Evidence from FMCG, Cement & Chemical Sector. Asian Journal of Economic Modelling, 7(2), 82-94

29 Pages Posted: 28 May 2019 Last revised: 20 May 2022

See all articles by Saad Abdullah

Saad Abdullah

Karachi University Business School, Students

Danish Ahmed Siddiqui

University of Karachi - Karachi University Business School

Date Written: 2019

Abstract

The aim of conducting research is to explore the dynamic relation of working capital financing with respect to profitability of the firm & for that purpose data has been gathered from three different sectors i.e. chemical, cement & FMCG. For analyzing the results panel least square method has been employed for which stationarity level of data series has been checked through panel unit root test & results shows data series were non-stationary on level 1 but it has been stationary on 1st difference. This study is also among very few of the researches which uses quadratic model and panel regression models to verify the results. Additionally, this study explore the working capital management effect on profitability along with liquidity and short-term obligation as a measure of working capital management through considering specifically manufacturing sector by using the fixed/random effect regression model, on which no previous research has been done. Finding indicate that there is an insignificant but negative relationship between Return on assets (ROA) and all the control variables of working capital except current assets and sales in pooled regression model and current assets & debt ratio in fixed/random effect model. In brief, study suggests that profitability of firm is not dependent on investment in working capital of chemical, cement and consumer sectors of Pakistan.

Keywords: Stationarity Working, Capital Management, Profitability, Least Square Method, Pakistan, ROA

Suggested Citation

Abdullah, Saad and Siddiqui, Danish Ahmed, Working Capital Financing and Corporate Profitability of Pakistan Manufacturing Firms: Evidence from FMCG, Cement & Chemical Sector (2019). Abdullah, S. and Siddiqui, D. A. (2019). Working Capital Financing and Corporate Profitability of Pakistan Manufacturing Firms: Evidence from FMCG, Cement & Chemical Sector. Asian Journal of Economic Modelling, 7(2), 82-94, Available at SSRN: https://ssrn.com/abstract=3381557

Saad Abdullah

Karachi University Business School, Students ( email )

Karachi
Pakistan

Danish Ahmed Siddiqui (Contact Author)

University of Karachi - Karachi University Business School ( email )

University Road
Karachi, Sindh 75270
Pakistan
3333485884 (Phone)

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