Study of Effects of Working Capital Management on Profitability of Firms in Pakistan

Abstract

The study used 12 years of annual panel data since that time to look at the consequences of working capital management on the viability of the enterprise during the different operating cycles of 65 non-financial companies registered on the Karachi Stock Exchange (Pakistan) from 2004- 2016. We use the Pedroni panel co-integration and Kao residual panel co-integration methods to ensure the effective long-term connection among the variables considered. The results of the regression analysis show that there is a prominent negative relationship among the cash conversion cycle and its composition and the profitability of the company. In addition, the economic cycle will influence the management of working capital and the company's interest ratetherefore, it may be said that the effective management of working capital is important, so it must be involved in the financial plan.