Working Capital Management and Profitability of UK Firms: A Contingency Theory Approach.

Tingbani, I., 2018. Working Capital Management and Profitability of UK Firms: A Contingency Theory Approach. International Journal of Banking, Accounting and Finance. (In Press)

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Abstract

Existing empirical research findings generally suggest that working capital management (WCM) affects and the firms’ financial performance. This paper adopts contingency theory framework to investigate how the relationship between WCM and financial performance is affected by the firms’ environment, resources and management capability. Our sample consist of an unbalanced panel of 802 firms listed on the London Stock Exchange (LSE) from 2004 to 2014 on which a dynamic panel data analysis was performed using a series of interactive models to estimate the relationship. The findings suggest that the impact of WCM on financial performance changes to reflect number contingency variables such as environmental, resources and management capabilities of the firm. These findings are significant because they demonstrate for the first time how the firms’ ability to enhance performance through investment in working capital is influenced by contingent factors such as environmental, resource and management capabilities of the firm. Our results are also important as they show that contingency theory helps to provide an understanding on the conditions under which investment in working capital can be an effective tool in enhancing financial performance and the relevant contingencies.

Item Type:Article
ISSN:1755-3830
Additional Information:This item is embargoed for 12 months after official publication date.
Uncontrolled Keywords:Working Capital Management; Profitability; Contingency Theory Approach; Interactive Models;
Group:Faculty of Management
ID Code:30983
Deposited By: Unnamed user with email symplectic@symplectic
Deposited On:27 Jul 2018 10:05
Last Modified:27 Jul 2018 10:09

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