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The Impact of Working Capital Management on Firms Profitability in Different Business Cycles: Evidence from Pakistan

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  • Nida Shah

    (IQRA University)

Abstract

This study investigates the influence of working capital management on firms' profitability under different business cycles in 65 non-financial firms listed on Karachi stock exchange of Pakistan by using the annual panel data for 10 years from the period of 2004 to 2013. We use Pedroni panel co-integration and Kao residual panel co-integration approaches to confirm the valid long run relationship between considered variables. The result of regression analysis indicates that the significant negative relationship exists between cash conversion cycle and its components with firms' profitability. Moreover, the business cycle affects the working capital management and firms' profitability relationship. It can be concluded that efficient working capital management matters and hence should be included in financial planning.

Suggested Citation

  • Nida Shah, 2016. "The Impact of Working Capital Management on Firms Profitability in Different Business Cycles: Evidence from Pakistan," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 58-70, March.
    • Handle: RePEc:gei:jnlfer:v:1:y:2016:i:1:p:58-70
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    Cited by:

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    4. Munawar Shabbir & Umer Iftikhar & Ahtesham Ali Raja, 2018. "Impact Of Working Capital Management On Profitability And Value Of Firm: A Study Of Manufacturing Sector Of Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 14(2), pages 14-11.
    5. Munawar Shabbir & Umer Iftikhar & Ahtesham Ali Raja, 2018. "Impact Of Working Capital Management On Profitability And Value Of Firm: A Study Of Manufacturing Sector Of Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 14(2), pages 1-12.
    6. Emad Kazemzadeh & José Alberto Fuinhas & Narges Salehnia & Fariba Osmani, 2023. "The effect of economic complexity, fertility rate, and information and communication technology on ecological footprint in the emerging economies: a two-step stirpat model and panel quantile regressio," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(1), pages 737-763, February.
    7. Sajid Ali, 2016. "How does Interest rate effect Exchange rate of Pakistan. Evidence of ARDL Bound Testing Approach," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 119-133, October.
    8. Saleem, 2016. "Impact of Monetary Policy on Private Investment: Evidence from Pakistan," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 134-146, October.

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