<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper analyses the link between working capital management and profitability of firms in the context of developing economies. A balanced panel consisting of eleven (11) manufacturing firms listed on the Ghana Stock Exchange covering the period of 2011-2017 was used. The link between working capital management and profitability was examined using dynamic panel regression (Arellano-Bond Estimation) technique. The study revealed that there is a significant positive linear relationship between working capital management and firms’ profitability. The findings also reveal the existence of a concave quadratic relationship between working capital management and firms’ profitability. There is an optimal level at which working capital management maximises firm’s profitability, therefore, managers need to ensure that they operate within the limits of the optimal level by implementing an effective and efficient working capital management policy. The study concludes that, the practice of an aggressive working capital management policy maximises a firm’s profitability.</p></abstract>

This paper analyses the link between working capital management and profitability of firms in the context of developing economies. A balanced panel consisting of eleven (11) manufacturing firms listed on the Ghana Stock Exchange covering the period of 2011-2017 was used. The link between working capital management and profitability was examined using dynamic panel regression (Arellano-Bond Estimation) technique. The study revealed that there is a significant positive linear relationship between working capital management and firms’ profitability. The findings also reveal the existence of a concave quadratic relationship between working capital management and firms’ profitability. There is an optimal level at which working capital management maximises firm’s profitability, therefore, managers need to ensure that they operate within the limits of the optimal level by implementing an effective and efficient working capital management policy. The study concludes that, the practice of an aggressive working capital management policy maximises a firm’s profitability.

Does Working Capital Management Affect Profitability of Ghanaian Manufacturing Firms?

Zagreb International Review of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

This paper analyses the link between working capital management and profitability of firms in the context of developing economies. A balanced panel consisting...

Does Working Capital Management Affect Profitability of Ghanaian Manufacturing Firms?

Published Online: Jun 08, 2020

Page range: 1 - 18

DOI: https://doi.org/10.2478/zireb-2020-0001

Keywords
working capital management, cash conversion cycle, dynamic panel regression, manufacturing firms, profitability

© 2020 Kwadwo Boateng Prempeh et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Does Working Capital Management Affect Profitability of Ghanaian Manufacturing Firms?

Published Online: Jun 08, 2020

Page range: 1 - 18

DOI: https://doi.org/10.2478/zireb-2020-0001

Keywordsworking capital management, cash conversion cycle, dynamic panel regression, manufacturing firms, profitability

© 2020 Kwadwo Boateng Prempeh et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
working capital management, cash conversion cycle, dynamic panel regression, manufacturing firms, profitability