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Working Capital Management Matters Profitability of Textile Sector: With GLS Model

Author

Listed:
  • Ashfaq Ahmad

    (School of Management and Economics, Beijing Institute of Technology, China.)

  • Sadia Bano

    (School of Management and Economics, Beijing Institute of Technology, China.)

Abstract

Purpose: The purpose of this study is to evaluate the influence of working capital management on firm’s profitability. Textile area in Pakistan is very important and considerable because this area is more productive. That’s why the management of resources and obligations are also important to enhance its productivity. Methodology: We used six year panel data from 2006-2011 of 115 textile KSE listed companies. Return on assets used as a profitability of firm and current assets to total assets ratio and current liabilities to total assets ratio are used for working capital investment policy and working capital financing policy respectively. Firm size and quick ratio are also used to find the impact on firm’s performance. Analysis is based on GLS regression with panel data which provides more accurate results then OLS model. Findings: So, findings show that conservative working capital investment policy has positive influence on firm’s profitability. And aggressive working capital financing policy is also influence the profitability. QR and firm size have also positive relation with profitability. Recommendations: This study is helpful for administrator and policy maker to make decision about working capital management. It is also beneficial for investors and lenders to get accurate information about companies.

Suggested Citation

  • Ashfaq Ahmad & Sadia Bano, 2015. "Working Capital Management Matters Profitability of Textile Sector: With GLS Model," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(11), pages 543-549, November.
    • Handle: RePEc:ijr:journl:v:3:y:2015:i:11:p:543-549
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    References listed on IDEAS

    as
    1. Dougherty, Christopher, 2011. "Introduction to Econometrics," OUP Catalogue, Oxford University Press, edition 4, number 9780199567089.
    2. Sushma Vishnani & Bhupesh Kr. Shah, 2007. "Impact of Working Capital Management Policies on Corporate Performance—An Empirical Study," Global Business Review, International Management Institute, vol. 8(2), pages 267-281, December.
    3. A.K. Sharma & Satish Kumar, 2011. "Effect of Working Capital Management on Firm Profitability," Global Business Review, International Management Institute, vol. 12(1), pages 159-173, February.
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    Cited by:

    1. Edward Domina Attafuah, (Ph.D.), 2024. "The Impact of Working Capital Management on the Profitability of Listed Banks: The Ghanaian Economy Experience," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 11(1), pages 235-252, January.
    2. Shahimi, Shahida & Hafizuddin-Syah, B.A.M & Fuad, Siti Hanisah, 2018. "The Effect of Sustainability Certification for Export on Operational Profitability of Malaysian Palm Oil Companies," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 55-67.

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    More about this item

    Keywords

    Working capital management; Profitability; Textile sector;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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