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Impact of Working Capital Management on Corporate Profitability- Empirical Evidence from Pharmaceutical Industry of Bangladesh

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  • Rakibul Islam
  • Mohammad Emdad Hossain
  • Mohammad Nazmul Hoq
  • Md. Morshedul Alam

Abstract

Working capital management plays centric role in enhancing operational efficiency and their ultimate profitability. Globally financial managers have been searching the proper way on how to utilize working capital components which prolong profitability. The purpose of this study is to assess the impact of working capital components on profitability indicators of selected pharmaceutical firms in Bangladesh. The paper used financial data of 9 pharmaceutical firms listed in Dhaka stock exchange (DSE) covered 2011-2015. Two methods were used in this study for analysis data set. Firstly, to measure the relationship between selected variables Pearson Correlation matrix was used. Secondly, multiple regression analysis was used to investigate the impact working capital components on profitability of selected pharmaceutical firms. The study also conducted Durbin Watson test to assess autocorrelation of selected variables. In this study the correlation matrix identified a negative correlation between working capital components and profitability, whereas regression analysis found number of days account receivable (AR) had significant positive and current ratio (CR) and debt ratio (DR) had appeared a significant negative impact on profitability.

Suggested Citation

  • Rakibul Islam & Mohammad Emdad Hossain & Mohammad Nazmul Hoq & Md. Morshedul Alam, 2018. "Impact of Working Capital Management on Corporate Profitability- Empirical Evidence from Pharmaceutical Industry of Bangladesh," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(9), pages 136-136, September.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:9:p:136
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    References listed on IDEAS

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    3. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    4. Furkan Baser & Soner Gokten & Guray Kucukkocaoglu & Hasan Ture, 2016. "Liquidity-Profitability Tradeoff Existence In Turkey: An Empirical Investigation Under Structural Equation Modeling," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 5(2), pages 27-44.
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    Cited by:

    1. Sarfraz Hussain & Van Chien Nguyen & Quang Minh Nguyen & Huu Tinh Nguyen & Thu Thuy Nguyen, 2021. "Macroeconomic factors, working capital management, and firm performance—A static and dynamic panel analysis," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-14, December.
    2. Maliha Rabeta, 2020. "Working Capital Management and Firm Performance of Companies in Pharmaceuticals & Chemicals Industry of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(8), pages 40-75.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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