Economic downturns and working capital management practices: a qualitative enquiry

Purpose - This study aims to explore changes in working capital management (WCM) practices in response to economic downturns, especially during the coronavirus pandemic. Design/methodology/approach - This study adopts an interpretative approach. This paper used semi-structured interviews with 2 finance directors and 13 top managers for data collection. This paper used thematic analysis for analysing the interview data. Findings - The study findings suggest that the traditional ways of managing working capital may no longer be sufficient during a crisis. Instead, dynamic financing, trade credit policy and continuous staff training to develop new skills are alternative WCM practices to navigate the challenges of a crisis. Further, this paper finds that economic conditions, such as inflation rates, interest rates, exchange rates and government policy, negatively affect WCM. Practical implications - The study findings highlight practical issues that may help firms meet their present and future financing needs, manage their day-to-day operational activities and enhance performance, both operational and financial. The study is beneficial for regulators in understanding a firm’s constraints during crises and respond appropriately. Originality/value - This is the first study, to the best of the knowledge that uses a qualitative approach to investigate the impact of economic downturns on WCM practices of firms. Thus, this study offers new insights into the fundamentals of WCM practices during crises.