Effects of Working Capital Management on SME Profitability

22 Pages Posted: 5 Apr 2006

Date Written: April 2006

Abstract

The objective of the research presented here is to provide empirical evidence about the effects of working capital management on the profitability of a sample of small and medium-sized Spanish firms. With this in mind, we collected a panel of 8,872 SMEs covering the period 1996-2002. The results, which are robust to the presence of endogeneity, demonstrate that managers can create value by reducing their firm's number of days accounts receivable and inventories. Equally, shortening the cash conversion cycle also improves the firm's profitability.

Keywords: Working capital, profitability, SMEs

JEL Classification: G3, G32

Suggested Citation

Martínez-Solano, Pedro and García-Teruel, Pedro J., Effects of Working Capital Management on SME Profitability (April 2006). Available at SSRN: https://ssrn.com/abstract=894865 or http://dx.doi.org/10.2139/ssrn.894865

Pedro Martínez-Solano (Contact Author)

University of Murcia ( email )

Dpt. Management and Finance
Murcia, Murcia 30100
Spain
34 868 883 747 (Phone)
34 868 887 537 (Fax)

HOME PAGE: http://webs.um.es/pmsolano

Pedro J. García-Teruel

University of Murcia ( email )

Department of Management and Finance
Murcia, 30100
Spain
34 868887828 (Phone)
34 868887537 (Fax)

HOME PAGE: http://webs.um.es/pjteruel/miwiki/doku.php

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