Working capital management, cash flow and SMEs’ performance

Journal article


Afrifa, G. and Tingbani, I. 2018. Working capital management, cash flow and SMEs’ performance. International Journal of Banking, Accounting and Finance. 9 (1). https://doi.org/10.1504/IJBAAF.2018.10010466
AuthorsAfrifa, G. and Tingbani, I.
Abstract

Purpose – The paper presents comprehensive evidence on the relationship between Working Capital Management (WCM) and SMEs’ performance by taking into consideration the plausible effect of cash flow.

Design/methodology/approach – The paper adopts a panel data regression analysis on a sample of 802 British quoted small and medium enterprises listed on the Alternative Investment Market for the period from 2004 to 2013.

Findings – The results of the study demonstrate the importance of cash flow on SMEs’ WCM and performance. According to our findings, WCM has a significantly negative impact on SME performance. However, with available cash flow, we find a significantly positive relationship. Additionally, our evidence revels that cash flow constrained (non-constrained) SMEs are able to enhance their performance through decreased (increased) investment in WCM.

Practical implications – Overall, the results demonstrate the importance of cash flow availability on SMEs’ working capital needs. Our findings suggest that in an event of cash flow unavailability (availability) managers should strive to reduce (increase) the investment in working capital in order to improve performance.

Originality/value – This current study incorporates the relevance of cash flow in assessing the association between WCM and firm performance.

KeywordsWorking capital management; performance; SMEs; cash flow
Year2018
JournalInternational Journal of Banking, Accounting and Finance
Journal citation9 (1)
PublisherInderscience
Digital Object Identifier (DOI)https://doi.org/10.1504/IJBAAF.2018.10010466
Publication dates
Online17 Jan 2018
Publication process dates
Deposited18 Jan 2018
Accepted21 Jun 2017
Accepted author manuscript
Output statusPublished
Additional information

CC BY-NC-ND: Creation Commons Attribution-NonCommercial-NoDerivatives License 4.0

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