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The determinants of working capital management and firms performance of textile sector in Pakistan

Tahir, M. and Anuar, M. B. A. (2016) The determinants of working capital management and firms performance of textile sector in Pakistan. Quality and Quantity, 50 (2). pp. 605-618. ISSN 0033-5177

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Abstract

The aim of this study is to determine the relationship of working capital management and the firm’s profitability in the textile sector of Pakistan. A sample of 127 textile firms listed in the Karachi stock exchange for the period 2001–2012 are used in the study. The study uses the dynamic panel generalized method of moments to analyze the data. The findings revealed that average collection period in days, net working capital level, current assets to operating income, current assets to sales ratio, current liabilities to total assets has negative impact on return on assets, whereas the accounts payable period in days, inventory turnover in days, cash conversion cycle, net trade cycle, cash turnover ratio, current assets to total assets ratio, and current ratio has a positive association with profitability. In case of the control variables, sales growth and firm size have positive associations with profitability, while financial debt ratio, gross domestic product, inflation and interest depicted negative results. The findings highlight the significance of the working capital components with profitability in the textile sector of Pakistan and recommends that by designing and implementing effective policies on working capital, the firm’s profitability can be enhanced.

Item Type:Article
Uncontrolled Keywords:Cash conversion cycle, Generalized method of moments (GMM), Return on assets, Working capital management
Subjects:H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:Management
ID Code:73800
Deposited By: Haliza Zainal
Deposited On:18 Nov 2017 15:19
Last Modified:18 Nov 2017 15:19

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