Impact of working capital management on profitability of Indian manufacturing companies
Dr. Mahesh Chand Garg and Meentu
This study aims to analyze the relationship between Working Capital Management and the profitability of firms listed on the Bombay Stock Exchange in the Indian manufacturing sector. The study implied the generalized two-step methods of moments (GMM) techniques proposed by Arellano and Bond. The sample consists of financial data of BSE-listed companies from 2012 to 2021. The empirical result of the study suggested that the coefficient of CCC and ICP is positive and significant. In contrast, the coefficient of RCP and APP is negative with Tobin’s Q. In the case of ROCE, the coefficient of CCC, ICP, RCP, and APP of positive and significant with Return on Capital Employed. Unlike previous studies that showed a linear relationship between WCM and firm profitability, this study discovered an inverse relationship. This study offers new evidence for an inverted U-shaped relationship between working capital investment and corporate profitability in India. In addition, this work employs GMM to control any endogeneity issues.