Impact of Working Capital Management on the Profitability of Firms: Case of Listed Pakistani Companies

This study examines relationship between measures of working capital management and corporate profitability. Working capital management is an important element of financial management for many firms as they make significant investment in working capital components. Applying fixed effect estimation model, we find a significant negative relation between firm’s profitability and various components of the working capital management. These results suggest that managers can improve firm’s profitability, and consequently, enhance firm value, through the efficient management of working capital components.