THE EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY: EVIDENCE FROM SOUTHEAST EUROPE

Bojana Vuković; Dejan Jakšić

doi:10.5937/ekoPolj1901159V

Authors

Bojana Vukovi?, PhD University of Novi Sad, Faculty of Economics, Subotica http://orcid.org/0000-0002-2147-8877
Dejan Jakši?, PhD University of Novi Sad, Faculty of Economics, Subotica http://orcid.org/0000-0003-1711-1869

DOI:

https://doi.org/10.5937/ekoPolj1901159V

Keywords:

Working capital Management, Profitability, Food industry

Abstract

The research is designed to examine the effect of working capital management on companys profitability in the food industry in Southeast Europe, during the five years period (2010-2014). The sample included 9883 active companies. The influence of certain variables of working capital management (current liquidity, the ratio of current to total assets of companies, the ratio of current liabilities to total assets of companies, financial leverage and size of the company) was measured on the probability of higher profitability by applying probit regression analysis. The results of probit regression provide support to a hypothesis that most of the analyzed variables of working capital management have statistically significant impact on the probability of higher profitability. In this paper is also researched how the optimal level of working capital management can contribute to the growth of profitability and value of the company as a whole.

Downloads

Download data is not yet available.

References

1. Ahmed, I. (2013). Impact of Working Capital Management on Performance of Listed Non Financial Companies of Pakistan: Application of OLS and LOGIT Models, Proceedings of 2nd International Conference on Business Management, University of Sargodha, Lhore, Punjab, 1-22. Retrieved from: https://www.umt.edu.pk/icobm2012/pdf/2C-55P.pdf
2. Akinlo, E., A. (2012). Firm Size-Profitability Nexus: Evidence from Panel Data for Nigeria. Economic Research-Ekonomska Istraživanja, 25 (3), 706-721.
3. Alemeida, H., & Campello, M. (2006). Financial Constraints, Asset Tangibility, and Corporate Investment. NBER Working Papers 12087., National Bureau of Economic Research, 1-37.
4. Alshatti, S. (2015). The Effect of the Liquidity Management on Profitability in the Jordanian Commercial Banks. International Journal of Business and Management, 10 (1), 62-71.
5. Ammar, A., Hanna, A., Nordheim, E., & Russell, J. (2003). Indicator Variables Model of Firms Size-Profitability Relationship of Electrical Contractors Using Financial and Economic Data. Journal of Construction Engineering and Management, 129, 192-197.
6. Binti M., N. E. A., & Mohd Saad, N. B. (2010). Working Capital Management: The Effect of Market Valuation and Profitability in Malaysia. International Journal of Business and Management, 5 (11), 140-155.
7. Brigham, E., & Daves, P. (2010). Intermediate Financial Management. SouthWestern Cengage Learning, Mason, USA.
8. Chukwunweike, E. (2014). The Impact of Liquidity on Profitability of Some Selected Companies: The Financial Statement Analysis (FSA) Approach. Research Journal of Finance and Accounting, 5 (5), 81-90.
9. Company Information across Europe, Retrieved from https://www.bvdinfo.com/en-us/our-products/company-information/international-products/amadeus (January, 15, 2017)
10. Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance & Accounting, 30 (3-4), 573-588.
11. Golas, Z., & Bieniasz, A. (2016). Empirical Analysis of the Influence of Inventory Management on Financial Performance in the Food Industry in Poland. Inzinerine Ekonomika-Engineering Economics, 27 (3), 264–275.
12. Graham, J. (2000). How Big are the Tax Benefits of Debt? Journal of Finance, 55, 1901-1941.
13. Harris, A. (2005). Working Capital Management: Difficult, but Rewarding. Financial Executive, 21 (4), 52-53.
14. Palanisamy, A., & Sengottaiyan A. (2015). Impact on Profitability of Working Capital Management of Selected Pharmaceutical Companies in India. International Journal of Research in Finance and Marketing, 5 (7), 117-129.
15. Papadogonas, T.A. (2007). The Financial Performance of Large and Small Firms: Evidence from Greece. Int. J. Financial Services Management, 2 (½), 1-12.
16. Pepur, S., Ćurak, M., & Poposki, K. (2016). Corporate Capital Structure: the Case of Large Croatian Companies. Economic Research-Ekonomska Istraživanja, 29, 498-514.
17. Pervan, M., & Mlikota, M. (2013). What Determines The Profitability of Companies: Case of Croatian Food and Beverage Industry. Economic ResearchEkonomska istraživanja, 26 (1), 277-286.
18. Pervan, M., & Visic, J. (2012). Influence of Firm Size on its Business Success. Croatian Operational Research Review, 3, 213-223.
19. Pouraghajan, A., & Emamgholipourarchi, M. (2012). Impact of Working Capital Management on Profitability and Market Evaluation: Evidence from Tehran Stock Exchange. International Journal of Business and Social Science, 3 (10), 311-318.
20. Soheilirad, S., Sofian, S., Mardani, A., Zavadskas, E., K., Kaklauskas, A., & Darvishvand, J., M. (2017). The Relationship between Non-Financial Stakeholders and Capital Structure. Inzinerine Ekonomika-Engineering Economics, 28 (4), 363–375.