Working capital management as a routine: An action based access to the topic

In times of unstable capital markets on the one side and historically low interests on the other, working capital management must be discussed from different perspectives. Limited sources of liquidity, and the high refinancing risk of lending companies, make the reduction of current assets and liabilities an even more important management task than before. On the other hand, low interest rates raise the need for defining the optimum level for working capital. Little research and empirical evidence exists when it comes to lifting working capital targets to create value. The objective of the present paper is to give evidence on whether German companies adapt their behavior in terms of handling working capital in the actual economic environment and to describe which practices have been established to perform this adaptation. The given analysis is based on a qualitative study. The data used have been gathered in 2014 and 2015 during semi structured interviews with CFOs or financial executives of 15 German and Austrian industrial firms. Our study suggests that adaptation is realized rather by moderating management attention and focus to the topic of capital cost but not by adjusting the financial targets themselves. This is because working capital reduction as become a management routine.