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Is profitability driven by working capital management? Evidence for high-growth firms from emerging Europe

Journal of Research in Business, Economics and Management

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Field Value
 
Title Is profitability driven by working capital management? Evidence for high-growth firms from emerging Europe
 
Creator Boțoc, Claudiu
Anton, Sorin Gabriel
 
Description Despite the importance of high-growth firms (HGFs) for job creation, innovation, and economic development in transition economies, current knowledge on the role of financial decisions in explaining their profitability is limited. The aim of this paper is to examine the relationship between working capital management and firm profitability. Using a panel data set on HGFs from Central, Eastern, and South-Eastern Europe during the time span 2006–2015, we found an inverted U-shape relationship between working capital level and firm profitability. Our findings indicate that HGFs should find and maintain the optimal working capital level that maximizes their profitability. Our results proved to be robust when we employ different methodology (quantile regression), different sub-samples as well as alternative measures of profitability and working capital management. The study highlights the importance of short-term financial decisions in enhancing HGFs’ profitability, with significant implications for academics and practitioners. We contribute to the extant literature by providing empirical evidence on the existence a concave relationship between working capital level and firm profitability for a cross-country sample of firms.
 
Publisher VGTU Press Technika
 
Date 2017-12-20
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://journals.vgtu.lt/index.php/JBEM/article/view/1153
10.3846/16111699.2017.1402362
 
Source Journal of Business Economics and Management; Vol 18 No 6 (2017); 1135-1155
2029-4433
1611-1699
 
Language eng
 
Relation https://journals.vgtu.lt/index.php/JBEM/article/view/1153/896
 
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