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The Effect of Working Capital Management on the Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)

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  • Ayşegül Toy
  • Ayhan Kapusuzoğlu
  • Nildağ Başak Ceylan

Abstract

An effective working capital can contribute to achieving the firm’s financial profitability, increasing the value of companies, creating a short-term financing source, continuing their activities and increasing their sustainability. This study examines the effect of working capital management on firm performances (ROA and TOBIN's Q) of firms operating in the textile industry in 4 countries (Brazil, India, Indonesia and Turkey) called the Fragile Five countries between 2010 and 2020. In the estimation of the coefficients of the panel regression models determined in this study, the Driscoll-Kraay estimator, which is robust against the problems of unobserved heterogeneity, autocorrelation, varying variance and cross-section dependence, was used. In the general evaluation of the panel data analysis estimation results, it is seen that the effect of working capital management on financial performance differs significantly depending on the selected performance variable. All of these results show that successful and effective working capital management in the textile sector depends on taking into account the differences in economic conditions, differences in capital markets, financial market performance and daily working habits, and evaluating each component of working capital separately.

Suggested Citation

  • Ayşegül Toy & Ayhan Kapusuzoğlu & Nildağ Başak Ceylan, 2022. "The Effect of Working Capital Management on the Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 7(4), pages 814-838.
    • Handle: RePEc:ahs:journl:v:7:y:2022:i:4:p:814-838
    DOI: 10.30784/epfad.1205427
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    References listed on IDEAS

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    More about this item

    Keywords

    Working Capital Management; Profitability; Firm Performance; Fragile Five; Driscoll-Kraay; Textile;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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