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Impact of Working Capital on Corporate Performance in Seasonal and Non-Seasonal Industries: Evidence from Pakistan

Author

Listed:
  • Dr. Muhammad Mahmood Shah Khan

    (Assistant Professor, Department of Banking and Finance, Dr. Hasan Murad School of Management, University of Management and Technology, Lahore- Pakistan)

  • Dr. Quratulain Zafar

    (Assistant Professor, Department of Banking and Finance, Dr. Hasan Murad School of Management, University of Management and Technology, Lahore- Pakistan)

  • Najeeb Nasir

    (Lecturer, Department of Banking and Finance, College of Business Administration, King Saud University, Riyadh- Kingdom of Saudi Arabia)

Abstract

The study examines the impact of working capital on corporate performance in the seasonal and non-seasonal industries of Pakistan. The five selected industries comprising a sample of 137 companies have been studied and five years of secondary data have been collected for analysis. These industries have been selected based on their unique characteristics with regard to inventories, receivables, and payables and due to the fact that these industries form a significant part of the overall economy of the country. Textile and sugar are seasonal industries based on cotton and sugar cane crops which are available for a limited period and hence bulk purchase and huge inventories are required to meet yearlong market requirements as chemical, pharmaceutical, cement, and manufacturing are non-seasonal industries where no such crop limitation or inventory buildup is required. The study suggests a significant positive relationship between working capital and profitability in seasonal (textile and sugar) industries. The study also finds a negative but significant relationship between working capital and profitability in the chemical industry. However, the study finds an insignificant relationship between working capital and profitability in the chemical and engineering industry. Moreover, the study suggests that there is a significant difference in the relationship between working capital and profitability across industries. The research findings are expected to be useful for the senior management, managers as well as practitioners in the area of investment decision-making.

Suggested Citation

  • Dr. Muhammad Mahmood Shah Khan & Dr. Quratulain Zafar & Najeeb Nasir, 2023. "Impact of Working Capital on Corporate Performance in Seasonal and Non-Seasonal Industries: Evidence from Pakistan," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 9(2), pages 627-635.
    • Handle: RePEc:rfh:jprjor:v:9:y:2023:i:2:p:627-635
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    References listed on IDEAS

    as
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    5. Greg Filbeck & Thomas M. Krueger, 2005. "An Analysis of Working Capital Management Results Across Industries," American Journal of Business, Emerald Group Publishing, vol. 20(2), pages 11-20.
    6. Morris Lamberson, 1995. "Changes in Working Capital of Small Firms in Relation to Changes in Economic Activity," American Journal of Business, Emerald Group Publishing, vol. 10(2), pages 45-50.
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    Full references (including those not matched with items on IDEAS)

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