Working capital management and firm’s profitability: Evidence from Czech certified firms from the EFQM excellence model

Figures & data

Figure 1. EFQM Certified Czech Organizations by Award Category (Source: EFQM.org)

Figure 2. EFQM Certified Czech Organizations by Sector-wise (Source: EFQM.org)

Table 1. Summary of variables (source: authors’ calculation)

Variables	Proxy	Measurements
Dependent variable
Firm profitability	ROA (Return on Asset)	(Earnings before Interest and Tax) / Total Assets
Independent variable
Days Sales Outstanding	DSO	(Account Receivable *365) / Cost of Sales
Days Inventory Outstanding	DIO	(Inventory * 365) / Cost of sales
Days Payable Outstanding	DPO	(Accounts payable) *365 / Cost of sales
Cash conversion cycle	CCC	DSO + DIO—DPO
Dummy Variable	EFQM	EFQM = 1, if the firm obtained certificate from EFQM, Otherwise EFQM = 0
Interaction term 1	EFQM * DSO	EFQM * DSO
Interaction term 2	EFQM * DIO	EFQM * DIO
Interaction term 3	EFQM * DPO	EFQM * DPO
Interaction term 4	EFQM * CCC	EFQM * CCC
Control variables
Leverage	LEV	Total Debt / Total Assets
Tangibility	FATA (Fixed Assets to Total Assets)	Fixed Assets / Total Asset
Size of Firm	SF	Log (Operating Revenue)
Current Ratio	CR	Current Asset / Current Debt

Table 2. Descriptive statistics of the selected variables (source: authors’ calculation)

Variables	Mean	Median	SD	Max	Min	Skewness	Kurtosis	N
Combine Firms
ROA	5.05	4.31	9.49	71.52	−69.25	−0.39	12.68	1409
DSO	200.51	174.24	128.59	1720.10	−215.15	3.43	26.38	1409
DIO	228.65	191.82	174.05	1714.50	−95.69	2.92	17.40	1404
DPO	121.74	101.18	154.00	3519.21	−2239.00	7.59	229.29	1407
CCC	306.78	273.71	247.38	2074.50	−3102.78	−0.79	37.13	1409
LEV	0.14	0.09	0.14	1.07	0.00	1.88	7.88	1383
FATA	0.44	0.44	0.17	0.95	0.00	−0.03	2.48	1402
SF	5.84	5.81	0.51	8.16	3.97	0.73	5.03	1408
CR	24.82	5.89	118.84	3315.37	0.07	18.05	446.37	1383
EFQM Firms
ROA	7.96	5.42	8.92	34.07	−9.55	0.91	3.43	87
DSO	188.74	175.76	125.89	562.94	7.27	1.09	3.95	87
DIO	170.33	137.84	153.30	603.22	3.54	1.06	3.34	87
DPO	122.64	107.61	56.07	268.30	11.61	0.73	3.06	87
CCC	236.42	219.47	184.53	783.84	−145.56	0.77	3.58	87
LEV	0.16	0.06	0.17	0.58	0.00	0.96	2.64	87
FATA	0.47	0.50	0.19	0.77	0.13	−0.13	1.76	87
SF	6.45	6.27	0.75	8.16	5.34	0.82	2.81	87
CR	50.61	6.66	181.29	1311.43	0.86	5.36	33.20	87

Table 3. Correlation coefficients of the variables (source: authors’ calculation)

	ROA	DSO	DIO	DPO	CCC	LEV	FATA	SF	CR	EFQM
ROA	1
DSO	−0.03	1
DIO	−0.21	0.11	1
DPO	−0.26	0.19	0.12	1
CCC	−0.03	0.49	0.73	−0.37	1
LEV	−0.14	−0.13	−0.05	0.10	−0.16	1
FATA	−0.11	−0.25	−0.23	0.02	−0.31	0.25	1
SF	0.19	0.12	−0.15	0.02	−0.06	−0.14	0.01	1
CR	0.04	0.01	−0.02	−0.01	0.00	−0.18	−0.13	−0.02	1
EFQM	0.08	−0.02	−0.09	0.00	−0.08	0.04	0.05	0.31	0.06	1

Table 4. Estimation results of the effects of WCM on ROA: pool regression analysis, (source: authors’ calculation)

Variables	Model 1		Model 2		Model 3		Model 4
	A	B	A	B	A	B	A	B
DSO	−0.007*** (0.001)
EFQM*DSO		0.027*** (0.001)
DIO			−0.013*** (0.000)
EFQM*DIO				0.024*** (0.000)
DPO					−0.019*** (0.000)
EFQM*DPO						0.020 (0.227)
CCC							−0.003*** (0.007)
EFQM*CCC								0.020*** (0.000)
LEV	−5.691*** (0.002)		−5.820*** (0.002)		−4.250*** (0.020)		−5.600*** (0.003)
FATA	−4.941*** (0.001)		−7.913*** (0.000)		−4.524*** (0.002)		−5.471*** (0.000)
SF	3.078*** (0.000)		2.786*** (0.000)		3.174*** (0.000)		3.108*** (0.000)
CR	0.001 (0.692)		−0.001 (0.797)		0.001 (0.523)		0.000 (0.971)
EFQM	−3.951** (0.033)		−3.246** (0.036)		−1.302 (0.575)		−3.651** (0.032)
Constant	−8.661*** (0.005)		−3.909 (0.223)		−8.693*** (0.004)		−8.999*** (0.005)
P- value	(0.0000)		(0.0000)		(0.0000)		(0.0000)
R^2	0.0672		0.1122		0.1215		0.0669
Adj R^2	0.0625		0.1076		0.1170		0.0621
N	1378		1373		1376		1378

Note: Coefficients and P-values, where p-values in parentheses, * p < 0.1, ** p < 0.05, *** p < 0.01

Table 5. Estimation results of the effects of WCM on ROA: MLE estimations, (source: authors’ calculation)

Variables	Model 1		Model 2		Model 3		Model 4
	A	B	A	B	A	B	A	B
DSO	−0.005** (0.022)
EFQM*DSO		0.002 (0.868)
DIO			−0.011*** (0.000)
EFQM*DIO				0.020** (0.040)
DPO					−0.013*** (0.000)
EFQM*DPO						0.012 (0.488)
CCC							0.000 (0.841)
EFQM*CCC								0.002 (0.725)
LEV	−3.844* (0.081)		−3.613* (0.096)		−2.786 (0.193)		−3.720* (0.092)
FATA	−10.153*** (0.000)		−11.096*** (0.000)		−8.770*** (0.000)		−9.075*** (0.000)
SF	4.536*** (0.000)		4.185*** (0.000)		4.169*** (0.000)		4.647*** (0.000)
CR	0.000 (0.960)		0.000 (0.869)		0.001 (0.628)		0.000 (0.883)
EFQM	−0.161 (0.948)		−3.566 (0.147)		−1.167 (0.673)		−0.486 (0.843)
Constant	−15.397*** (0.002)		−11.484** (0.022)		−13.424*** (0.004)		−17.609*** (0.000)
P- value	(0.0000)		(0.0000)		(0.0000)		(0.0000)
N	1378		1373		1376		1378

Note: Coefficients and P-values, where p-values in parentheses, * p < 0.1, ** p < 0.05, *** p < 0.01