Working capital management and firm performance: are their effects same in covid 19 compared to financial crisis 2008?

Figures & data

Table 1. Summary of variables and measurements

Variables	Abbreviation	Measurement
Return on Assets	ROA	$\frac{Netprofit}{Totalassets}$
Tobin’s Q	TQ	$\frac{Marketvalueofequity-bookvalueofdebt}{Bookvalueoftotalassets}$
Current Asset to Total Assets Ratio	CATAR	$\frac{Currentassets}{Totalassets}$
Current Liabilities to Total Assets Ratio	CLTAR	$\frac{Currentliabilities}{Totalassets}$
Cash Conversion Cycle	CCC	$Accountsreceivableperiod+inventoryconverionperiod-accountspayableperiod$
Net Working Capital	NWC	$\frac{Currentassets-currentliabilities}{Totalassets}$
Dummy variable 1	Crisis	Crisis = 1, if the firm year is 2008 and 2009, otherwise Crisis = 0
Dummy variable 2	Covid	Covid = 1, if the firm year is 2020, otherwise Covid = 0
Control Variables
Firm Size	FS	Natural log of sales
Sales Growth	SG	$\frac{Currentyearsales-previousyearsales}{previousyearsales}$
Leverage	LEV	$\frac{Totaldebt}{Totalequity}$
Inflation	INF	Consumer price index
Gross Domestic Product	GDP	log (real GDP per capita)

Table 2. Descriptive statistics

	N	Mean	SD	Min	Max	Skewness	Kurtosis
ROA	8078	0.905	0.575	0.004	7.280	1.832	8.215
TQ	8078	1.101	1.032	0.018	16.454	4.987	37.982
CATAR	8078	0.491	0.234	0.010	9.116	7.181	242.322
CLTAR	8078	0.316	0.230	0.003	6.896	5.844	117.583
CCC	8078	150.173	149.502	−639.066	2650.588	4.105	36.003
NWC	8078	0.230	0.233	−8.125	5.953	−3.876	264.330
FS	8078	11.414	1.419	0.693	16.787	0.401	1.431
SG	8078	0.233	0.944	−1.000	47.673	27.563	1069.219
LEV	8078	0.707	1.175	−6.975	63.087	20.465	993.938
INF	8078	3.230	3.635	−1.139	20.286	2.197	5.917
GDP	8078	26.467	0.310	25.750	27.023	−1.765	3.444

Source: Authors’ calculations using stata statistical software

Table 3. Pearson’s correlation coefficients

	ROA	TQ	CATAR	CLTAR	CCC	NWC	FS	SG	LEV	GDP	INF
ROA	1
TQ	0.198	1
CATAR	0.079	0.449	1
CLTAR	0.049	0.363	0.301	1
CCC	−0.080	−0.369	0.232	−0.045	1
NWC	0.053	0.062	0.545	−0.329	0.172	1
FS	0.003	−0.016	−0.130	0.014	−0.103	−0.176	1
SG	−0.004	0.011	0.009	0.077	0.011	0.018	0.028	1
LEV	0.008	0.002	−0.076	0.486	−0.011	−0.284	0.121	0.063	1
GDP	0.006	0.023	0.029	0.004	0.015	0.027	−0.020	0.191	−0.008	1
INF	0.093	0.150	−0.034	0.125	−0.074	−0.083	−0.062	0.097	0.179	0.121	1

Source: Authors’ calculations using stata statistical software

Table 4. Kruskal-Wallis non-parametric test for the effect of crisis 2008 and covid 19 on working capital management and firm performance

Variables	Pre-crisis	Crisis	Pre-covid	Covid	K-Wallis Stat. (P-value)
ROA	4342.65	4378.77	4011.35	3339.28	87.034 (0.000)*
TQ	4354.22	3935.72	4033.72	3990.09	13.088 (0.004)*
CATAR	4169.90	3997.67	4044.85	3939.29	2.371 (0.352)
CLTAR	4297.89	4207.76	3997.71	3862.46	18.269 (0.000)*
CCC	4230.24	4086.68	4005.72	4092.19	5.837 (0.120)
NWC	3902.16	3907.21	4106.48	3771.63	18.087 (0.000)*

Source: Authors’ calculations using statistical package for the social sciences (SPSS)

Note: Mean ranks for each variable are given in respective rows. Periods in columns are defined as Pre-crisis: 2004–2007, Crisis: 2008–2009, Pre-Covid: 2010–2019, Covid: 2020. In last column, values in parenthesis are p-values for Kruskal-Wallis statistics, which are defined as * <1%, ** <5%, *** <10%.

Table 5. GMM estimation results for the relation between working capital policies and firm performance

	Model 1	Model 2
	ROA	TQ
Variables	Coef.	Coef.
Lag	0.539*** (0.000)	0.121*** (0.000)
CATAR	0.229*** (0.000)	0.248*** (0.000)
CLTAR	-0.081*** (0.000)	-0.227*** (0.000)
CCC	-0.002*** (0.000)	-0.001*** (0.000)
NWC	0.024** (0.019)	0.312*** (0.000)
FS	-0.016*** (0.000)	-0.031*** (0.000)
SG	0.201*** (0.000)	-0.036*** (0.000)
LEV	-0.026*** (0.000)	0.242*** (0.000)
GDP	0.000 (0.315)	-0.001** (0.048)
INF	0.007*** (0.000)	0.008*** (0.000)
Constant.	0.738*** (0.000)	1.176*** (0.000)
No. of Obs.	8655	8655
No. of instruments	283	285
AR (2) (P-value)	0.530	0.055
Hansen Test (P-value)	0.197	0.745

Note: P-values in parenthesis are * <0.1, ** <0.05%, *** <0.01

Source: Authors’ calculations using Stata statistical software

Table 6. GMM estimation results for effect of crisis 2008 and covid 19 on the relation between working capital and firm performance

	Model 3	Model 4	Model 5	Model 6
	ROA	TQ	ROA	TQ
Variables	Coef.	Coef.	Coef.	Coef.
Lag	0.701*** (0.000)	0.117*** (0.000)	0.872*** (0.000)	0.119*** (0.000)
Crisis 2008	−0.050** (0.032)	0.658*** (0.000)
Crisis* CATAR	0.819*** (0.000)	1.224*** (0.000)
Crisis* CLTAR	−0.271*** (0.000)	−0.966*** (0.000)
Crisis* CCC	−0.001*** (0.000)	−0.007*** (0.000)
Crisis* NWC	−0.272*** (0.000)	−0.131 (0.579)
Covid 19			−0.339** (0.022)	1.603*** (0.000)
Covid*CATAR			−3.003*** (0.000)	3.567*** (0.000)
Covid*CLTAR			3.660*** (0.000)	−2.474*** (0.000)
Covid*CCC			0.001** (0.018)	−0.016*** (0.000)
Covid*NWC			2.791*** (0.000)	−0.626 (0.229)
FS	−0.007** (0.020)	−0.033*** (0.001)	−0.013*** (0.001)	−0.031** (0.009)
SG	0.287*** (0.000)	−0.043* (0.081)	0.096*** (0.000)	−0.036 (0.254)
DR	0.062*** (0.000)	0.199*** (0.000)	0.084*** (0.000)	0.281*** (0.000)
GDP	0.001** (0.116)	0.004*** (0.000)	0.004*** (0.000)	0.007*** (0.000)
INF	0.005** (0.000)	0.003 (0.470)	−0.015*** (0.002)	0.002 (0.887)
Constant.	0.218*** (0.000)	1.105*** (0.000)	0.155*** (0.001)	0.984*** (0.000)
No. of Obs.	8655	8655	8655	8655
No. of instruments	136	138	161	115
AR (2)	0.167	0.703	0.773	0.119
Hansen Test	0.554	0.424	0.281	0.836

Note: P-values in parenthesis are * <0.1, ** <0.05%, *** <0.01

Source: Authors’ calculations using stata statistical software