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Macroeconomic factors, working capital management, and firm performance—A static and dynamic panel analysis

Author

Listed:
  • Sarfraz Hussain

    (Universiti Teknologi Malaysia
    Government Graduate College)

  • Van Chien Nguyen

    (Thu Dau Mot University)

  • Quang Minh Nguyen

    (University of Finance-Marketing)

  • Huu Tinh Nguyen

    (Thu Dau Mot University)

  • Thu Thuy Nguyen

    (Thuongmai University)

Abstract

The aim of the study is to explore the interaction effect of macroeconomics indicators, and working capital flows on financial performance in a developing economy. By using the static and dynamic approach of panel analysis, it has been shown that there is a relationship between the components of working capital and the gross profit and cash conversion duration. Second, while interest rates used as an interaction variable with the average payable days have adverse effects, firm performance would decrease if interest rates increase. The average payable duration extends; instead of primarily regressing, the average payable period positively correlates with firm performance. The conversion cycle of cash has a negative relationship, but it reverses its actions after using interest rate interaction. There is a negative relationship with gross profit in the simple regression exchange rate and cash conversion cycle while using the second interaction variable with the cash conversion cycle, has positive effects. In addition, the exchange rate gets higher to increase the cash conversion length, financial performance will be increased. In addition, the exchange rate gets higher to increase the cash conversion length, financial performance will be increased. This study receives new results, the exchange rate increases, companies that can pay early to payable will get higher firm performance while exchange rate and the interest rate have a significant role in changing the firm performance.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:palcom:v:8:y:2021:i:1:d:10.1057_s41599-021-00778-x
    DOI: 10.1057/s41599-021-00778-x
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