Publicação
Working capital management and profitability: evidence from the portuguese tourism sector
| Resumo: | Working Capital Management should be managed in accordance to the importance that daily financial decisions assume in the present economic environment. It is expected that an efficient Working Capital Management affects positively firms’ profitability and consequently its development. This relationship has been investigated by several authors in order to provide the best practices for managers to apply. Through an empirical analysis, considering a sample of 6,659 Portuguese Tourism SMEs for the time period 2007-2014, this study examines the relationship between profitability and Working Capital Management. Consistent with previous studies, the findings, which are robust to the presence of endogeneity, establish a negative relation between the working capital, measured by the cash conversion cycle, and profitability, measured by the ROA. This suggests that firms can enhance profitability by reducing the time period of accounts receivable and inventories, while no statistical significant relationship is observed between accounts payable and profitability. Overall, shortening the cash conversion cycle has a positive impact in firms’ profitability. This research contributes to the present literature by confirming previous findings regarding SMEs in general, and with particular focus to the case of Portuguese Tourism SMEs. |
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| Autores principais: | Sousa, João Luís Matos de |
| Assunto: | Working Capital Profitability Portugal Tourism SMEs PME Pequenas e Médias Empresas Turismo Rentabilidade Capital financeiro Gestão financeira |
| Ano: | 2016 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso restrito |
| Instituição associada: | ISCTE |
| Idioma: | inglês |
| Origem: | Repositório ISCTE |
| Resumo: | Working Capital Management should be managed in accordance to the importance that daily financial decisions assume in the present economic environment. It is expected that an efficient Working Capital Management affects positively firms’ profitability and consequently its development. This relationship has been investigated by several authors in order to provide the best practices for managers to apply. Through an empirical analysis, considering a sample of 6,659 Portuguese Tourism SMEs for the time period 2007-2014, this study examines the relationship between profitability and Working Capital Management. Consistent with previous studies, the findings, which are robust to the presence of endogeneity, establish a negative relation between the working capital, measured by the cash conversion cycle, and profitability, measured by the ROA. This suggests that firms can enhance profitability by reducing the time period of accounts receivable and inventories, while no statistical significant relationship is observed between accounts payable and profitability. Overall, shortening the cash conversion cycle has a positive impact in firms’ profitability. This research contributes to the present literature by confirming previous findings regarding SMEs in general, and with particular focus to the case of Portuguese Tourism SMEs. |
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