Strategic working capital management in Polish SMES: Navigating risk and reward for enhanced financial performance
-
DOIhttp://dx.doi.org/10.21511/imfi.21(2).2024.20
-
Article InfoVolume 21 2024, Issue #2, pp. 253-264
- Cited by
- 265 Views
-
78 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study examines the impact of operating capital management (WCM) strategies on the monetary execution of small and medium-sized enterprises (SMEs) in Poland, with a particular focus on finding the correct equalization between liquidity and benefit. The review utilizes relapse investigation to survey the effect of forceful and conservative (WCM) techniques on the benefit and fluidity of 4,891 Polish SMEs from 2012 to 2021, as measured by an informational index of budgetary and operational information. The results demonstrate a noteworthy connection between WCM improvements and budgetary results. However, aggressive actions do not just mean higher earnings; they also involve heavier financial risks. On the other hand, cautious methods are linked with stronger financial stability but may lead to lower profit. According to the survey, when cash conversion cycle (CCC) days fall by 1%, return on total assets (ROA) can increase by approximately 1:0 percentage points. This demonstrates again that WCM is very important in improving company profits. These findings have implications for academics, practitioners, and government officials.
- Keywords
-
JEL Classification (Paper profile tab)G32, G31, M13, L25
-
References38
-
Tables10
-
Figures0
-
- Table 1. Descriptive findings
- Table 2. Classification of figures by sector
- Table 3. Explanation of the correlation matrix
- Table 4. Performance indicators by ROA categories
- Table 5. Analysis of working capital’s effect on ROA using fixed effects method
- Table 6. Impacts of WC on ROIC and ROA analyzed through the application of fixed effects models
- Table 7. Results of the analysis performed to evaluate endogeneity
- Table 8. Investigating the impact of working capital on ROIC and ROA using centered CCC
- Table 9. Investigating the impact of working capital on ROIC and ROA by centering INV, ACR, ACP, and CCC values
- Table 10. Details of how pooled regression analysis was used to examine the effect of working capital on ROA and ROIC
-
- Akbar, A., Jiang, X., & Akbar, M. (2020). Do working capital management practices influence investment and financing patterns of firms? Journal of Economic and Administrative Sciences, 38(1), 91-109.
- Anwar, C. J., Okot, N., Suhendra, I., Indriyani, D., & Jie, F. (2024). Monetary policy, macroprudential policy, and bank risk-taking behaviour in the Indonesian banking industry. Journal of Applied Economics, 27(1), 2295732.
- Baker, H. K., Kumar, S., & Singh, H. P. (2019). Working capital management: Evidence from Indian SMEs. Small Enterprise Research, 26(2), 143-163.
- Bhattacharyya, A., Rahman, M. L., & Wright, S. (2023). Improving small and medium-size enterprise performance: Does working capital management enhance the effectiveness of financial inclusion? Accounting & Finance, 63(4), 3943-3969.
- Chang, C.-C. (2018). Cash conversion cycle and corporate performance: Global evidence. International Review of Economics & Finance, 56, 568-581.
- Choi, T. Y., Hofmann, E., Templar, S., Rogers, D. S., Leuschner, R., & Korde, R. Y. (2023). The supply chain financing ecosystem: Early responses during the COVID-19 crisis. Journal of Purchasing and Supply Management, 29(4), 100836.
- Czerwonka, L., & Jaworski, J. (2023). Determinants of working capital management in small and medium enterprises: Evidence from Central and Eastern Europe. Journal of International Studies, 16(2).
- De Marchi, M., Friedrich, F., Riedl, M., Zadek, H., & Rauch, E. (2023). Development of a Resilience Assessment Model for Manufacturing Enterprises. Sustainability, 15(24), 16947.
- Deari, F., Kukeli, A., Barbuta-Misu, N., & Virlanuta, F. O. (2022). Does working capital management affect firm profitability? Evidence from European Union countries. Journal of Economic and Administrative Sciences.
- Deb, P., Naskar, S., Devaraj, S., & Basu, P. (2023). Impact of working capital on firm performance: Does IT matter? Journal of Operations Management, 69(6), 983-1007.
- DeMenno, M. B. (2023). Environmental sustainability and financial stability: Can macroprudential stress testing measure and mitigate climate-related systemic financial risk? Journal of Banking Regulation, 24(4), 445-473.
- Errico, M., De Noni, I., & Teodori, C. (2022). SMEs’ financial risks in supply chain trade with large companies: The case of Italian automotive component industry. Journal of General Management, 47(2), 126-137.
- Figlioli, B., Antônio, R. M., Gatsios, R. C., & Lima, F. G. (2024). Influence of the cash conversion cycle on firm’s financial performance: Evidence from publicly traded firms in the Latin American context. Accounting & Finance.
- Ikpe, V., & Shamsuddoha, M. (2024). Functional Model of Supply Chain Waste Reduction and Control Strategies for Retailers – The USA Retail Industry. Logistics, 8(1), 22.
- Jabbouri, I., Benrqya, Y., Satt, H., Naili, M., & Omari, K. (2023). Determinants of working capital management for emerging markets firms: Evidence from the MENA region. Journal of Economic and Administrative Sciences.
- Leuschner, R., Choi, T. Y., Rogers, D. S., Hofmann, E., & Templar, S. (2023). ‘To fund’as a new purpose of supply chain management: Making a case for supply chain financing. Journal of Purchasing and Supply Management, 29(5), 100881.
- Liu, Y., & Wei, H. (2024). Digital transformation and enterprise financial asset allocation. Applied Economics, 1-18.
- Mahmood, F., Ahmed, Z., Hussain, N., & Ben-Zaied, Y. (2023). Working capital financing and firm performance: A machine learning approach. Review of Quantitative Finance and Accounting, 1-36.
- Mahmood, F., Ahmed, Z., Hussain, N., & Zaied, Y. B. (2024). Macroeconomic factors and financing strategies in working capital: Evidence from China. International Journal of Finance & Economics, 29(1), 35-57.
- Mishra, N. K., Pande Sharma, P., & Chaudhary, S. K. (2024). Redefining agile supply chain practices in the disruptive era: A case study identifying vital dimensions and factors. Journal of Global Operations and Strategic Sourcing.
- Morshed, A. (2020). Role of working capital management in profitability considering the connection between accounting and finance. Asian Journal of Accounting Research, 5(2), 257-267.
- Morshed, A. (2024a). Comparative analysis of accounting standards in the Islamic banking industry: A focus on financial leasing. Journal of Islamic Accounting and Business Research.
- Morshed, A. (2024b). Mathematical Analysis of Working Capital Management in MENA SMEs: Panel Data Insights. Applied Mathematics & Information Sciences, 18, 111-124.
- Morshed, A., & Ramadan, A. (2023). Qualitative Analysis of IAS 2 Capability for Handling the Financial Information Generated by Cost Techniques. International Journal of Financial Studies, 11(2), 67.
- Moudud-Ul-Huq, S., & Rahman, M. (2023). Quadratic effect of bank size on capital regulation and risk-taking behavior: Evidence from the Central Europe. International Journal of Financial Engineering, 10(03), 2350019.
- Mudjiyono, M. (2022). The Effect of Sales and Receivables Turnover on Company Net Profit. Journal of Management and Business Environment (JMBE), 3(2), 140-163.
- Nawrocki, T. L., & Jonek-Kowalska, I. (2023). Innovativeness in energy companies in developing economies: Determinants, evaluation and comparative analysis using the example of Poland. Journal of Open Innovation: Technology, Market, and Complexity, 9(1), 100030.
- Panagiotidou, E., Chountalas, P. T., Magoutas, A. Ι., & Kitsios, F. C. (2024). The multifaceted impact of ISO/IEC 17025 accreditation: A sector-specific analysis in civil engineering testing and calibration laboratories. The TQM Journal.
- Pant, P., Rathore, P., Dadsena, Kumar, K., & Shandilya, B. (2023). Working capital and firm performance: Role of COVID-19 disruption. International Journal of Productivity and Performance Management, 73(4), 1137-1166.
- Ramadan, A., Alkhodary, D., Alnawaiseh, M., Jebreen, K., Morshed, A., & Ahmad, A. B. (2024). Managerial Competence and Inventory Management in SME Financial Performance: A Hungarian Perspective. Journal of Statistics Applications & Probability, 13(3), 859-870.
- Ramadan, A., & Morshed, A. (2024). Optimizing retail prosperity: Strategic working capital management and its impact on the global economy. Journal of Infrastructure, Policy and Development, 8(5), 3827.
- Sargon, B. (2024). Board structure and net working capital: Evidence from FTSE all share index companies. Applied Economics, 1-14.
- Shiyyab, F. S., & Morshed, A. Q. (2024). The Impact of Credit Risk Mitigation on the Profits of Investment Deposits in Islamic Banks. In Islamic Finance: New Trends in Law and Regulation (pp. 117-129). Cham: Springer Nature Switzerland.
- Sunjoko, M. I., & Arilyn, E. J. (2016). Effects of inventory turnover, total asset turnover, fixed asset turnover, current ratio and average collection period on profitability. Jurnal Bisnis Dan Akuntansi, 18(1), 79-83.
- Toth, R., Kasa, R., & Lentner, C. (2022). The Impact of Financial Culture on the Operation of Hungarian SMEs before and during COVID-19. Risks, 10(7), 135.
- Wang, R. (2024). Safeguarding Enterprise Prosperity: An In-depth Analysis of Financial Management Strategies. Journal of the Knowledge Economy, 1-29.
- Wu, Q., Yan, D., & Umair, M. (2023). Assessing the role of competitive intelligence and practices of dynamic capabilities in business accommodation of SMEs. Economic Analysis and Policy, 77, 1103-1114.
- Wu, S.-M., Chan, F. T., & SioChong U, T. (2024). Enhancing sustainability in mass customisation of consumer electronics with salvage value through supply chain financing. International Journal of Logistics Research and Applications, 1-21.