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Time Taken to Reach the Performance Summit: Nature of Relation Between Working Capital Management and Firm Performance in the Indian Context

Author

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  • Nitya Nand Tripathi

    (IFHE University, Hyderabad, Telangana, India,)

  • Naseem Ahamed

    (IBS, The ICFAI, Hyderabad, Telangana, India.)

Abstract

This article examines the impact of working capital management (WCM) measured by cash conversion cycle (CCC) on the financial performance of firms in the Indian context. The period of study is from the year 2000 to 2014 for companies listed on the National Stock Exchange, India. The study uses regression model to analyze panel data. Financial and banking related companies have been removed from the dataset to mitigate bias. This study finds that WCM is an important variable that affects the financial performance of firms. An empirical examination has been conducted in this study over a fairly big dataset spread over a long period in the Indian context. Increasing the efficiency of CCC would lead to an increment in firm's performance up to a certain point which is referred to as the performance summit in this study. Our study concludes that there exists an inverse U-shaped relationship between WCM and performance.

Suggested Citation

  • Nitya Nand Tripathi & Naseem Ahamed, 2017. "Time Taken to Reach the Performance Summit: Nature of Relation Between Working Capital Management and Firm Performance in the Indian Context," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 530-536.
    • Handle: RePEc:eco:journ1:2017-04-63
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Matin Khan & Md. Ismail Hossain Shagor & Abu Kalam & Md. Sojib Ahmed, 2020. "Working Capital Management and Firm Profitability in the Textile Industry of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(7), pages 118-127.

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    More about this item

    Keywords

    Cash Conversion Cycle; Working Capital Management; Firm Profitability; Emerging Markets;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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