Effects of Working Capital Management on SME Profitability

International Journal of Managerial Finance, Vol. 3, No. 2, pp. 164-177, 2007

Posted: 3 May 2007

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 have collected a panel of 8,872 small to medium-sized enterprises (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 inventories and the number of days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the firm's profitability.

Keywords: Working capital, profitability, SMEs

JEL Classification: G31, G32

Suggested Citation

García-Teruel, Pedro J. and Martínez-Solano, Pedro, Effects of Working Capital Management on SME Profitability. International Journal of Managerial Finance, Vol. 3, No. 2, pp. 164-177, 2007, Available at SSRN: https://ssrn.com/abstract=982868

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

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
2,997
PlumX Metrics