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The Impact of Working Capital and Macroeconomic Variables on the Profitability of Listed Industrial Firms in South Africa

Author

Listed:
  • Mutambara Tatenda Emmanuel

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, South Africa.)

  • Nyatanga Phocenah

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, South Africa.)

  • McCullough Kerry

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, South Africa.)

Abstract

This study examines the impact of working capital management policies (WCMP) and macroeconomic variables on the profitability of 83 industrial firms listed on the JSE over the period 2010-2020. The system Generalized Method of Moments (GMM) approach was employed in regression analysis to deal with the existence of endogeneity. Results establish that working capital investment policy (WCIP) is significantly and negatively related to firm profitability. A significant and positive relationship was found between working capital financing policy (WCFP) and firm profitability. Contrary to our expectations, interest rates demonstrated significant and positive relations with return on assets(ROA). Exchange rates and inflation rates proved to impact firm profitability significantly and negatively, which resulted in the study recommending JSE-listed industrial firms to pay special attention to the external environment. Economic growth influenced firm profitability positively and significantly, which aligned with the idea that GDP growth increases the average consumers' income per capita, increasing the goods and services consumed, enhancing profitability.

Suggested Citation

  • Mutambara Tatenda Emmanuel & Nyatanga Phocenah & McCullough Kerry, 2023. "The Impact of Working Capital and Macroeconomic Variables on the Profitability of Listed Industrial Firms in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 13(5), pages 32-42, September.
    • Handle: RePEc:eco:journ1:2023-05-5
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Working Capital Management Policies; Macroeconomic Variables; Firm Profitability;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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