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The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms

Finance, Money, and Public Administration Department, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi, Carol I Avenue, No. 11, 700505 Iasi, Romania
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J. Risk Financial Manag. 2021, 14(1), 9; https://doi.org/10.3390/jrfm14010009
Received: 1 December 2020 / Revised: 19 December 2020 / Accepted: 21 December 2020 / Published: 25 December 2020
(This article belongs to the Special Issue Corporate Finance, Governance, and Social Responsibility)
The purpose of this study is to investigate the relationship between working capital and firm profitability for a sample of 719 Polish listed firms over the period of 2007–2016. The scarcity of empirical evidence for emerging economies and the importance of working capital efficiency motivate the research on the working capital–financial performance relationship. The paper adopts a quantitative approach using different panel data techniques (ordinary least squares, fixed effects, and panel-corrected standard errors models). The empirical results report an inverted U-shape relationship between working capital level and firm profitability, meaning that working capital has a positive effect on the profitability of Polish firms to a break-even point (optimum level). After the break-even point, working capital starts to negatively affect firm profitability. The study brings theoretical and practical contributions. It extends and complements the literature on the field by highlighting new evidence on the non-linear interrelation between working capital management (WCM) and corporate performance in Poland. From the practitioners’ perspective, the results highlight the importance of WCM for firm profitability. View Full-Text
Keywords: emerging economy; profitability; working capital management emerging economy; profitability; working capital management
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MDPI and ACS Style

Anton, S.G.; Afloarei Nucu, A.E. The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms. J. Risk Financial Manag. 2021, 14, 9. https://doi.org/10.3390/jrfm14010009

AMA Style

Anton SG, Afloarei Nucu AE. The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms. Journal of Risk and Financial Management. 2021; 14(1):9. https://doi.org/10.3390/jrfm14010009

Chicago/Turabian Style

Anton, Sorin G., and Anca E. Afloarei Nucu 2021. "The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms" Journal of Risk and Financial Management 14, no. 1: 9. https://doi.org/10.3390/jrfm14010009

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