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Working Capital Management, Cash Flow and SMEs’ Performance.

Afrifa, G. and Tingbani, I., 2018. Working Capital Management, Cash Flow and SMEs’ Performance. International Journal of Banking, Accounting and Finance, 9 (1), 19-43.

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DOI: 10.1504/IJBAAF.2018.089421

Abstract

Purpose – The paper presents comprehensive evidence on the relationship between Working Capital Management (WCM) and SMEs’ performance by taking into consideration the plausible effect of cash flow. Design/methodology/approach – The paper adopts a panel data regression analysis on a sample of 802 British quoted small and medium enterprises listed on the Alternative Investment Market for the period from 2004 to 2013. Findings – The results of the study demonstrate the importance of cash flow on SMEs’ WCM and performance. According to our findings, WCM has a significantly negative impact on SME performance. However, with available cash flow, we find a significantly positive relationship. Additionally, our evidence revels that cash flow constrained (non-constrained) SMEs are able to enhance their performance through decreased (increased) investment in WCM. Practical implications – Overall, the results demonstrate the importance of cash flow availability on SMEs’ working capital needs. Our findings suggest that in an event of cash flow unavailability (availability) managers should strive to reduce (increase) the investment in working capital in order to improve performance. Originality/value – This current study incorporates the relevance of cash flow in assessing the association between WCM and firm performance.

Item Type:Article
ISSN:1755-3830
Uncontrolled Keywords:Working Capital Management; Performance; SMEs; Cash Flow
Group:Bournemouth University Business School
ID Code:30017
Deposited By: Symplectic RT2
Deposited On:27 Nov 2017 11:07
Last Modified:14 Mar 2022 14:08

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