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
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: Suggested Citation