Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You and Your Team.

Learn More →

Working capital requirements of manufacturing SMEs: evidence from emerging economy

Working capital requirements of manufacturing SMEs: evidence from emerging economy PurposeThe purpose of this paper is to analyze the effects of various factors like profitability, growth opportunity, financial leverage, assets tangibility, operating cash flows, age and size of firm on working capital requirements (WCR) of manufacturing SMEs in India.Design/methodology/approachThe paper uses a panel data regression model with fixed and random effect estimations. The data utilized in this study includes financial data of 254 manufacturing SMEs operating in India for the period 2010 to 2014.FindingsThe overall results of the study indicate that operating cash flow, financial leverage, profitability, sales growth and asset tangibility are the key drivers of WCR for Indian manufacturing SMEs. Profitability of firm and sales growth are found to be positively related to WCR. In contrast, asset tangibility, operating cash flow and financial leverage are found to be negatively related to WCR.Research limitations/implicationsThis paper investigates firm-specific factors while ignoring external factors like GDP growth, business indicators and industry type. Further research can be done to assess the effect of these external factors on WCR.Originality/valueThis research contributes to the working capital literature by providing empirical evidence on determining factors of WCR in manufacturing SMEs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of International Business and Strategy Emerald Publishing

Working capital requirements of manufacturing SMEs: evidence from emerging economy

Loading next page...
 
/lp/emerald-publishing/working-capital-requirements-of-manufacturing-smes-evidence-from-powM0U7iV7
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2059-6014
DOI
10.1108/RIBS-03-2017-0027
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to analyze the effects of various factors like profitability, growth opportunity, financial leverage, assets tangibility, operating cash flows, age and size of firm on working capital requirements (WCR) of manufacturing SMEs in India.Design/methodology/approachThe paper uses a panel data regression model with fixed and random effect estimations. The data utilized in this study includes financial data of 254 manufacturing SMEs operating in India for the period 2010 to 2014.FindingsThe overall results of the study indicate that operating cash flow, financial leverage, profitability, sales growth and asset tangibility are the key drivers of WCR for Indian manufacturing SMEs. Profitability of firm and sales growth are found to be positively related to WCR. In contrast, asset tangibility, operating cash flow and financial leverage are found to be negatively related to WCR.Research limitations/implicationsThis paper investigates firm-specific factors while ignoring external factors like GDP growth, business indicators and industry type. Further research can be done to assess the effect of these external factors on WCR.Originality/valueThis research contributes to the working capital literature by providing empirical evidence on determining factors of WCR in manufacturing SMEs.

Journal

Review of International Business and StrategyEmerald Publishing

Published: Sep 4, 2017

References