A Study on the Attributes of the Productivity–Liquidity Relationship at the Firm Level

Abstract

This study explores the various attributes of the direct relationship between firm-level productivity, measured by total factor productivity, and liquidity, determined by the cash conversion cycle, without the intermediating effect of firm profits. For this objective, panel data is employed to understand the existence, linearity, directionality, type, and seasonality (or its absence) of such a relationship for firms of all sizes across several sampled industries. The results demonstrate that the relationship exists to a considerable extent, is bi-directional, predominantly linear with non-linearity observed in the case of revenue-wise large firms, and primarily negative and seasonal.

Keywords:

• Working Capital Management
• Predictive
• Distance Correlation
• LASSO Regression

EMJ Focus Areas:

• Economics of Engineering
• Knowledge Management
• Operations Management

Additional information

Notes on contributors

Naveen Tiruvengadam

Dr. Naveen Tiruvengadam received his PhD in Systems and Engineering Management from Texas Tech University. His research interests include Organizational Productivity and Performance Management; Capital Management, Project Management, System Dynamics Simulation, and Applied Machine Learning. He is passionate about developing tools to help businesses, especially small and medium-sized enterprises, improve their performance. In a gist, Dr. Tiruvengadam is focused on applied research that can bridge the gap between academia, industry, and society.

Armando Elizondo-Noriega

Dr. Mario G. Beruvides, is an AT&T professor at the Department of Industrial, Manufacturing, and Systems Engineering at Texas Tech University. He received his PhD from Virginia Polytechnic Institute & State University. He obtained a master’s degree in Industrial Engineering from the University of Miami. In addition, he obtained a bachelor’s degree in Mechanical Engineering from the same university. His major areas of interest are engineering management, productivity measurement, systems engineering, and advanced economics.

Mario G. Beruvides

Dr. Armando Elizondo-Noriega is an adjunct professor at the School of Architecture, Art, and Design at Tecnologico de Monterrey, Campus Monterrey. He received his PhD in Systems and Engineering Management from Texas Tech University and his second PhD in Engineering Sciences with a major in Industrial Engineering from Tecnologico de Monterrey (ITESM). His major areas of research are mathematical modeling, systems theory, strategic planning, econometrics, productivity, statistical techniques, simulation, operations research, and economic development.