Review of Literature On Working Capital Management and Future Research Agenda

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REVIEW OF LITERATURE ON WORKING CAPITAL MANAGEMENT AND FUTURE

RESEARCH AGENDA
Article in Journal of Economic Surveys · January 2018
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doi: 10.1111/joes.12299
REVIEW OF LITERATURE ON WORKING

CAPITAL MANAGEMENT AND FUTURE
RESEARCH AGENDA
Punam Prasad and Sivasankaran Narayanasamy
Indian Institute of Management Ranchi
Samit Paul
Indian Institute of Management Calcutta
Subir Chattopadhyay
Indian Institute of Management Ranchi
Palanisamy Saravanan*
Indian Institute of Management Tiruchirappalli
Abstract. The purpose of this study is to take a stock of what has been studied on working capital
management (WCM) so far and ascertain the factors which are more likely to be impacted by poor
WCM. Moreover, it aims to spell out the areas for further research on WCM so that the body of
knowledge can be expanded. A systematic literature review of the research works on WCM has
been performed using Google Scholar. Articles with citations of 50 and above as of June 05, 2018
are considered for the detailed citation based analysis. Further, classification of such articles has
been done on the basis of common themes followed by a thorough content analysis. The citation
based analysis suggests that there is a growing popularity of studies related to WCM in recent
times. However, majority of the impactful studies are published in relatively lower category
journals. This further intrigues us to explore the content of such studies. Based on the content, the
studies are classified under five different themes. It is found that majority of the highly cited
articles have examined the relation between the WCM and profitability of the firms. Moreover,
repetitive uses of few proxies in such studies have also been identified. This finding most probably
explains the reason behind so many highly cited articles getting published in relatively lower
category journals. In view of this, this study tries to explore further scope of research on WCM and
lists down potential research questions for the future researches. Firstly, it provides an idea about
the most cited area of researches related to WCM and the recent growth of studies in this domain.
Academicians can decide upon their future area of research based on the findings related to the
proxies and outcome from these studies. Secondly, it shows the most popular avenue of publishing
the articles related to WCM which will certainly motivate the researchers to pursue such study. It
has been found from the analysis that majority of the impactful articles are published in lower
category journals. Therefore, this study identifies the reason behind the same and lists down some
innovative research questions to provide some future research directions. Thirdly, the finance
managers can use this finding to identify the relevant consequences of poor WCM. Finally, it can
serve as a reference point for all future ideas related to WCM. The paper
∗
Corresponding author contact email: psn@iimtrichy.ac.in; Tel: 8974002055.
Journal of Economic Surveys (2018) Vol. 00, No. 0, pp. 1–35
∗C 2018 John Wiley & Sons Ltd.

2 PRASAD ET AL.
classifies the present literature on WCM into five major themes and performs a content analysis of
the same. This is essential as the content analysis highlights different proxies used as inputs which
effectively drive efficient WCM. Moreover, the study also identifies the huge scope of future
research in the domain of WCM. According to our limited knowledge, such extensive literature
review on WCM is rare.
Keywords. Capital expenditure; Profitability; Research agenda; Trade-off theory; Working capital
management
1. Introduction
Working capital management (WCM) is one of the crucial decisions to be dealt by managers as it
impacts the liquidity and profitability of the firm (Appuhami, 2008). Guthmann and Dougall (1948)
have defined working capital (WC) as the excess of current assets over the current liabilities. WC is the
lifeblood of a business enterprise and if not managed properly, it may result in the failure of the
business (Padachi et al., 2012). Accounts receivables, inventory, and accounts payables are the major
components of the operational or noncash portion of the WC (Mullins and Komisar, 2009) of a firm
and the success of the firm is determined by the ability of the finance manager in dealing with these
variables in an optimal manner (Filbeck and Krueger, 2005). Recently, PWC Global released the “WC
Report 2017/18” on all globally listed companies. This report suggests that improving WCM may
release 1.2 trillion euro of cash which may boost their capital investment by 48%. 1 Three main
observations about the financial performances of the globally listed companies for the last 5 years are
cited in this report. They are: (1) a reduction in the return on capital employed (ROCE); (2) a sudden
plummet in investment; and (3) a stretch on payables which creates pressure on supply chain.
Given this backdrop, immediate action is imperative so that WCM of the firms can be improved. It is
important to know the consequences of poor WCM of a company. The burgeoning literature on WCM
can provide guidance in this context. Therefore, the motivation behind this study is to take a stock of
what has been investigated on WCM so far and ascertain the factors which are likely to be affected by
poor WCM. We strongly believe that such factors are already buried in extant pool of literature on
WCM since its inception. Hence, in this study, we adopt a systemic literature review methodology
based on citation index to classify the studies expressing the relationship between WCM and other
relevant variables.
Sample of literature used in this study lead us to classify them under the following broad categories
based on their themes. They are:
i. Relationship between WCM and profitability of firms; 2

ii. Association between WC investment and capital expenditure of organizations;3
iii. Trade-offs between profitability and liquidity objectives of managers;4
iv. Determinants of investment in WC;5 and
v. Other aspects of WCM;6 such as
(a) WCM across industries
(b) WCM policies
(c) WCM for small firms
(d) WCM and firm’s value
(e) WCM and supply chain management
(f) Optimizing WCM
(g) WCM and operating cash flow
(h) Combined measures of efficiency in WCM.

Categorization of sample studies under different themes is followed by a content analysis of the
same. This is essential as the content analysis highlights different proxies used as inputs which
effectively drive efficient WCM. The findings of our study have several academic and practical
implications. First, it provides an idea about the most cited area of researches related to WCM and the
recent growth of studies in this domain. Academicians can decide upon their future area of research
based on the findings related to the proxies and outcome from these studies. Second, it shows the most
popular avenue for publishing the articles related to WCM. It has been observed from the analysis that
majority of the impactful articles are published in relatively lower ranked journals. Therefore, this
study identifies the reason behind the same and lists down some innovative research questions to
provide certain future research directions. Third, the managers can use this finding to identify the
relevant consequences of poor WCM. Finally, it can serve as a reference point for studies related to
WCM.
According to our limited knowledge, such an extensive literature review on WCM is rare. So far, we
have identified following three studies which have performed detailed literature review on WCM:
Gentry, 1988; Viskari et al., 2011, Singh and Kumar, 2014. Gentry (1988) presented his review in the
year 1988 but the major publication activities on WCM are occurred on and after financial slowdown
of 2008. Viskari et al. (2011) in their WCM literature review used bibliometric methods with a small
sample of 23 firms and restricted articles published from 1990 till 2010 that dealt with the WCM topic
as a whole and not a single subarea of it. Singh and Kumar (2014) applied systematic literature review
(SLR) method for reviewing WCM literatures that were indexed in Google Scholar. Their content
analysis was concentrated on mainly two aspects, impact of WC on profitability of firm and WC
practices. Our current study differs from these three in certain ways. First, it considers the most recent
pool of literature related to WCM. Second, unlike Singh and Kumar (2014), this study does not aim to
analyze only the existing literature on certain themes such as impact of WC on profitability of the
firms. Rather, its purpose is to take a complete stock of literature, classify them on different themes,
and then identify some future scopes of research. Third and most importantly, this study analyzes the
quality of journals, that have published the highly cited articles on WCM, based on categorization or
impact factors provided by Australian Business Deans Council (ABDC), Association of Business
Schools (ABS), Web of Science, and Scopus.7 Thus, it provides some new insights about the
prospective sources of publishing studies on WCM.
The remainder of this paper is organized as follows. Section 2 describes the methodology of the
study. Section 3 performs the citation-based analysis and lists down the most cited articles and journals
on WCM. The content analysis of the most cited articles based on various themes are discussed in
detail in Section 4. Section 5 presents the directions for future research on WCM and the finally,
Section 6 concludes the study.
2. Methodology
The objective of the systematic review is to offer collective understandings through theoretical blend
such that the review process enhances the methodological rigor for academicians and develops a
reliable knowledge base for practitioners (Tranfield et al., 2003). In this paper, we have adopted the
SLR methodology as proposed by Tranfield et al. (2003) and subsequently applied by other studies
(e.g., Singh and Kumar, 2014). The review process consists of four steps as presented in Figure 1.
We have started the review process by searching for the research papers on WCM in “Google
Scholar” by using the term “WCM” and other keywords such as “liquidity management,” “current
assets management,” and “short-term financial management” and other keywords pertaining to WCM.
Google Scholar is used for sourcing the data as it provides a complete set of details on the worldwide
researches carried on any field in a simple and time saving manner. It is a free scholarly database that
provides greater citation counts than other databases such as Web of Science or Scopus, which are more
controlled and hence are of limited reach. Obtaining citations using Google Scholar has the virtue of
attaining references from peer-reviewed journal articles as well as working papers, books available on
the Internet, and other
Step 1: Identification of Data and Selection of research papers
Step 2: Description and Classification of Selected research papers
Step 3: Detailed Content and Citation analysis of selected research
Step 4: Reporting of findings and scope for further research papers
Figure 1. Systematic Literature Review (As Proposed by Tranfield et al., 2003).
nonscholarly materials such as widely read newsletters. Moreover, unlike controlled databases, Google
Scholar presents geographically neutral results (Shah et al., 2017) and is available for those researchers
who cannot access very expensive Web of Science or Scopus databases (Levine-Clark and Gil, 2009).
Even a longitudinal and cross-disciplinary comparison across these three major bibliometric databases
by Harzing and Alakangas (2016) evinced the superiority of Google Scholar in both the aspects of
reach of publications and count of citations. Our initial search resulted in the display of several
hundreds of research articles on WCM with the details such as the title of the paper, author(s), journal
title, year of publication, and most importantly the number of citations. We have sorted out the
initially obtained articles by the number of citations and selected only those articles which have 50 or
more citations as of June 5, 2018. Choosing a particular threshold of citations is a matter of concern as
it needs to provide a perfect trade-off between quality and attainability. Following Cole (1970) and
Astrom (2010), we have chosen the threshold of 50 so that our sample comprises reasonably impactful
articles and remains free from any criticism related to quality and duplication. At the same time, we
believe that it is possible for a high-quality article to earn 50 citations in reasonable amount of time,
especially if we consider the huge growth of studies related to WCM and superior reach of Google
Scholar. This step of sorting has reduced the number of papers from several hundreds to 75. Detailed
citation-based analysis of these 75 studies have been performed to identify the most impactful studies
in the domain of WCM and to point out the most popular avenue of publishing such studies related to
WCM. Thereafter, classification of these studies is done based on their underlying themes and thorough
content analyses of those themes. Finally, based on this SLR, the further research agenda are set.
3. Citation-Based Analysis
In this section, at first the most cited studies on WCM are listed. Then, the popular avenues of
publishing such studies are explored by identifying journals which publish articles that are more
impactful (high average citations) and are more in quantity (higher number of studies). Finally, in order
to identify the quality of researches in this domain, rankings of such journals according to ABDC,
ABS, Web of Science, and Scopus are reported.
3.1 Studies on WCM

Table 1 presents the selected impactful research articles in descending order of their citations received
along with their respective years of publication. It is evident from the table that Deloof is the most cited
REVIEW OF LITERATURE: WORKING CAPITAL MANAGEMENT 5
Table 1. Studies on WCM.
Serial Number of Year of

Number Title of the Paper & Author(s) Citations Publication
(1) (2) (3) (4)
1 Does WCM Affect Profitability of Belgian Firms? – Deloof, M. 1535 2003

2 Efficiency of WCM and Corporate Profitability – Shin, H.H. and 971 1998
Soenen, L.
3 WC and Fixed Investment: New Evidence on Financing 910 1993
Constraints – Fazzari, Steven M. and Petersen, Bruce C.
4 Effects of WCM on Small Medium Enterprise (SME) Profitability 889 2007
– Garc´ıa-Teruel, P.J. and Mart´ınez-Solano, P.
5 Relationship between WCM and Profitability of Listed Companies 872 2006
in the Athens Stock Exchange – Lazaridis, I. and Tryfonidis,
D.
6 WCM and Profitability – Case of Pakistani Firms – Raheman, A. 866 2007
and Nasr, M.
7 Liquidity-Profitability Trade-off: An Empirical Investigation in an 809 2004
Emerging Market – Eljelly, A.M.A.
8 Trends in WCM and Its Impact on Firms’ Performance: An 640 2006
Analysis of Mauritian Small Manufacturing Firms – Padachi,
K.
9 The Relationship between WCM and Profitability: Evidence from 477 2010
the United States – Gill, A., Biger, N. and Mathur, N.
10 A Cash Conversion Cycle Approach to Liquidity Analysis – 469 1980
Richards, V.D. and Laughlin, E.J.
11 The Influence of WCM Components on Corporate Profitability – 366 2010
Mathuva, D.
12 Portfolio Management Approach in Trade Credit Decision Making 326 2007
– Michalski, G.
13 The Determinants of WCM –Chiou, J.R., Cheng, L. and Wu, 294 2006
H.W.
14 Impact of Aggressive WCM Policy on Firms’ Profitability – 294 2009a
Nazir, M.S. and Afza, T.
15 WC and Financial Management Practices in the Small Firm Sector 286 1996
– Peel, M.J. and Wilson, N.
16 Liquidity Management, Operating Performance, and Corporate 285 2002
Value: Evidence from Japan and Taiwan – Wang, Y.-J.
17 An Analysis of WCM Results across Industries – Filbeck, G. and 273 2005
Krueger, T.M .
18 The Relationship between WCM and Profitability: A Vietnam 271 2010
Case – Dong, H. and Su, J.
19 The Effect of WCM on Firm Profitability: Evidence from Turkey – 257 2008
Samiloglu, F. and Demirgunes, K.
20 WCM and Corporate Profitability: Evidence from Panel Data 257 2009
Analysis of Selected Quoted Companies in Nigeria – Falope,
Olufemi I. and Ajilore, Olubanjo T.

6 PRASAD ET AL.
(Continued)
Serial Table 1. Continued

Number Title of the Paper & Author(s) Number of Year of
Citations Publication
(1) (2) (3) (4)
21 The Focus of WCM in U.K. Small Firms – Howorth, C. and 254 2003
Westhead, P.
22 Net Operating WC Behavior: A First Look – Hill, M.D., Kelly, 230 2010
G.W. and Highfield, M.J.
23 Changes in WC of Small Firms in Relation to Changes in 215 1995
Economic Activity – Lamberson, M.
24 Industry Practice Relating to Aggressive Conservative WC 210 1998
Policies – Weinraub, H.J. and Visscher, S.
25 WCM: The Effect of Market Valuation and Profitability in 200 2010
Malaysia – Mohamad, N.E.A. and Saad, N.B.
26 WCM and Corporate Performance of Manufacturing Sector in 187 2010
Pakistan – Raheman, A., Afza, T., Qayyum, A. and Ahmed,
B.A.
27 Effect of WCM on Firm Profitability Empirical Evidence from 179 2011
India – Sharma, A.K. and Kumar, S.
28 An Analysis of WCM Efficiency in Telecommunication 174 2007
Equipment Industry – Ganesan, V.
29 The Impact of Firms’ Capital Expenditure on WCM: An Empirical 170 2008
Study across Industries in Thailand – Appuhami, B.A.R.
30 Investment and Financing Constraints in China: Does WCM Make 166 2013
a Difference? – Ding, S., Guariglia, A . and Knight, J.
31 WCM, Corporate Performance, and Financial Constraints – 166 2014
Ban˜ os-Caballero, S., Garc´ıa-Teruel, P.J.
and Martinez-Solano, P.
32 WC Approaches and Firm’s Returns –Afza, T. and Nazir, M.S. 165 2008
33 WCM in SMEs – Ban˜ os-Caballero, S., Garc´ıa-Teruel, P.J. and 163 2010
Martinez-Solano, P.
34 Is It Better to be Aggressive or Conservative in Managing WC – 163 2007
35 Industry Influence on Corporate WC Decisions – Hawawini, G., 156 1986
Viallet, C. and Vora, A.
36 Impact of WCM Policies on Corporate Performance – An 143 2007
Empirical Study – Vishnani, S. and Shah, B.K.
37 WCM Efficiency: A Study on the Indian Cement Industry – 140 2004
Ghosh, S.K. and Maji, S.G.
38 WCM: An Urgent Need to Refocus – Rafuse, Maynard E. 138 1996
39 A Supply Chain-Oriented Approach of WCM – Hofmann, E. and 138 2010
Kotzab, H.
40 The Effect of WCM on Firm’s Profitability: Empirical Evidence 132 2010
from an Emerging Market – Charitou, M., Elfani, M. and
Lois, P.
(Continued)

Table 1. Continued

(1) (2) (3) (4)
41 The Impact of WCM on Firm Profitability in Different Business 131 2014

Cycles: Evidence from Finland – Enqvist, J., Graham, M. and
Nikkinen, J.
42 Measuring Associations between WC and Return on Investment – 130 1997
Smith, M.B. and Begemann, E.
43 State of the Art of WCM – Smith, K.V. 124 1973
44 How Does WCM Affect the Profitability of Spanish SMEs? – 119 2012
Ban˜ os-Caballero, S., Garc´ıa-Teruel, P.J. and
Martinez-Solano, P.
45 The Relationship between WCM Efficiency and EBIT – 117 2009
Ramachandran, A. and Janakiraman, M.
46 WCM and Shareholders’ Wealth – Kieschnick, R., Laplante, M. 116 2013
and Moussawi, R.
47 Impact of WCM in the Profitability of Hindalco Industries Limited 116 2008
– Singh, J.P. and Pandey, S.
48 WCM and Firms’ Performance in Emerging Markets: The Case of 114 2012
Jordan – Abuzayed, B.
49 WCM and Corporate Performance: Case of Malaysia – 112 2009
Zariyawati, M.A., Annuar, M.N., Taufiq, H. and Rahim,
A.A.
50 WCM and Corporate Profitability: Evidence from Iran – Alipour, 108 2011
M.
51 Relationship between Efficiency Level of WCM and Return 106 2009
on Total Assets in ISE (Istanbul Stock Exchange) –
Mehmet, S. and Eda, O.
52 An Integrative Approach To WCM – Shulman, J.M. and Cox, 105 1985
R.A.K.
53 WC Requirements and the Determining Factors in Pakistan – 105 2009b
54 Is WCM Value-Enhancing? Evidence from Firm Performance and 98 2015
Investments – Aktas, N., Croci, E. and Petmezas, D.
55 WCM and Firm Profitability: Empirical Evidence from 93 2013
Manufacturing and Construction Firms Listed on Nairobi
Securities Exchange, Kenya – Makori, D.M. and Jagongo, A.
56 Effects of WCM on the Profitability of Thai Listed Firms – 89 2012
Napompech, K.
57 The Relative Importance of WCM and Its Components to SMEs’ 81 2013
Profitability – Tauringana, V. and Afrifa, G.A.
58 WCM in Heavy Engineering Firms – A Case Study – 78 2004
Mukhopadhyay, D.
(Continued)
(1) (2) (3) (4)
59 The Relationship between WCM and Profitability: Evidence from 77 2011

an Emerging Market – Karaduman, H.A., Akbas, H.E,
Caliskan, A.O. and Durer, S.
60 WCM and Profitability: Evidence from Ghanaian Listed 75 2013
Manufacturing Firms – Akoto, R.K., Awunyo-Vitor, D. and
Angmor, P.L.
61 Affects of WCM on Firm’s Performance: Evidence from Turkey – 73 2012
Vural, G., Sokmen, A.G. and Cetenak, E.H .
62 Toward a Theory of WCM – Sagan, J. 72 1955
63 Relationship between WCM and Profitability in Brazilian Listed 69 2011
Companies – Ching, H.Y., Novazzi, A. and Gerab, F.
64 WCM and Profitability: A Case of ALBA county companies – 67 2010
Danuletiu, A.E.
65 WC and Profitability: An Empirical Analysis – Narware, P.C. 67 2004
66 Impact of WCM on the Profitability of Oil and Gas Sector of 66 2006
Pakistan – Shah, S.M.A. and Sana, A.
67 Comparing WC Practices in Canada, the United States, and 65 1999
Australia: A Note – Khoury, N.T., Smith, K.V. and MacKay,
P.I.
68 Effect of WCM Practices on Financial Performance: A Study of 64 2012
Small Scale Enterprises in Kisii South District, Kenya –
Nyamao, N.R., Patrick, O. and Martin, L.
69 A Chance Constrained Goal Programming Model for WCM – 62 1977
Keown, A.J. and Martin, J.D.
70 Effects of WCM on Profitability: The Case for Selected 60 2010
Companies in the Istanbul Stock Exchange – Karaduman,
H.A., Akbas, H.E., Ozsozgun, A. and Durer, S.
71 Inventory and WCM: An Empirical Analysis – Singh, P. 57 2008
72 Impact of WCM on Firms’ Performance: Evidence from 55 2011
Non-Financial Institutions of Kse-30 Index – Azam, M. and
Haider, S.I.
73 WCM-Satisificing versus Optimization – Knight, W.D. 53 1972
74 WCM, Firms’ Performance and Market Valuation in Nigeria – 52 2012
Ogundipe, S.E., Idowu. A. and Ogundipe, L.O.
75 Liquidity Management and Corporate Profitability: Case Study of 50 2012
Selected Manufacturing Companies Listed on the Nigerian
Stock Exchange – Owolabi, S.A. and Obida, S.S.
Note: Table 1 presents the 75 research articles in descending order of their citations received (updated as of June 5,
2018) along with their respective years of publication.
author with 1535 citations for his article titled “Does WCM Affect Profitability of Belgian Firms?”
which was published in 2003. The article authored by Shin and Soenen with the title “Efficiency of
WCM and Corporate Profitability” is the second most cited paper on WCM with 971 citations. This
article was published 5 years before (in 1998) the article published by Deloof. There are total 53 studies
which have been cited more than 100 times. Out of that, 33 studies have been published in last 10 years
(2007 onward). The most recent study reported in the list was published in 2015 and received 98
citations. This suggests that the studies on WCM are highly popular among the researchers in the last
two decades and their impact is also substantial.
3.2 Journals on WCM

Table 2 presents the list of journals that have published highly cited articles on WCM in the descending
order of their citations per article published. The average number of citations is reported in last column
of the table. According to this, the Journal of Business Finance and Accounting has received the
highest citations per paper (1535 citations) followed by Financial Practice and Education (now,
Journal of Applied Finance) with 971 citations per article published in it. There are 42 journals in the
list which have received more than 100 citations on an average. The interesting part is that despite such
greater number of citations the number of papers per journal is quite low. From column (3) of this table,
it is evident that there is only one journal which has published four highly cited articles, only two
journals each of which has published three highly cited articles on WCM and seven journals each of
which has published two such articles on WCM as of June 5, 2018. This makes the count of journals to
61 that have published 75 most cited articles. This finding suggests that the researchers are relying on
broader pool of journals instead of concentrating on few theme-based specialized journals for their
impactful studies.
3.3 Ranking of Journals

As discussed in previous subsection, the number of journals publishing highly cited articles on WCM is
quite high. However, only few of such journals could have attracted more number of impactful articles
on WCM. This generates a natural curiosity to know about the quality and repute of such journals.
Table 3 reports the name of these journals sorted in descending order of average citations received
along with their rank/impact factor provided by ABDC, ABS, Web of Science, and Scopus. Column (4)
of the table suggests that only 31 of the 61 most cited journals are listed in ABDC. Of these 32 rated
journals, six of them are rated under “A* category” (highest rank), eight under “A category,” five under
“B category,” and the rest of them (12 in number) under “C category.” This means that of 61 highly
cited journals, 42 journals are either nonindexed or ranked in “C category” as per ABDC. According to
ABS journal ranking (column (5)), only one belongs to “4*” (highest rank), three journals fall under
the category of “4,” eight are listed as “3,” eight are categorized in “2,” and one in “1.” Rest 40 journals
have not fulfilled the minimum criteria to get them ranked by ABS. Column (6) of the table presents
whether these 61 journals are listed in Web of Science. The finding suggests that only 20 journals are
listed and rest 41 journals are not listed by Web of Science. Finally, the last column of the table lists the
impact factor provided to these journals by Scopus. According to this, there are 35 journals which are
not eligible to be ranked in Scopus journal base. Among rest 26, 13 journals exhibit impact factor
greater than 1 and other 13 are of impact factor of less than 1. These findings provide some interesting
insights related to the studies on WCM. Overall, it is quite surprising to reveal that of these 61 journals
that publish 75 most impactful studies on WCM, 29 are not at all listed by any of the four most
recognized reviewers of quality journals, especially in the area of business. Yet the articles published in
these journals have crossed the threshold of 50 citations. This necessarily indicates that the top tier
journals are not finding enough articles on WCM with significant contributions. These articles are
getting published in relatively lower rated journals and keep on attracting higher number of citations
from subsequent studies.
10 PRASAD ET AL.
Table 2. Journals on WCM.
Average
Serial Number of Number of
Number Title of the Journal & Author(s) of the Article(s) Article(s) Citations
(1) (2) (3) (4)
1 Journal of Business Finance & Accounting (Deloof, M.) 1 1535

2 Journal of Applied Finance (earlier known as Financial Practice and 1 971
Education) (Shin, H.H. and Soenen, L.)
3 The RAND Journal of Economics (Fazzari, Steven M. and Petersen, 1 910
Bruce C.)
4 Journal of Financial Management and Analysis (Lazaridis, I. and 1 872
Tryfonidis, D.)
5 International Journal of Commerce and Management (Eljelly, 1 809
A.M.A.)
6 International Review of Business Research Papers (Raheman, A. and 2 753
Nasr, M.; Padachi, K.)
7 International Journal of Managerial Finance (Garcia -Teruel, P.J. 2 502
and Martinez-Solano, P.; Abuzayed, B.)
8 Business and Economics Journal (Gill, A., Biger, N. and Mathur, N.) 1 477
9 Romanian Journal of Economic Forecasting (Michalski, G.) 1 326
10 Research Journal of Business and Management (Mathuva, D.; 2 311.5
Falope, Olufemi I. and Ajilore, Olubanjo T.)
11 Journal of American Academy of Business (Chiou, J.R., Cheng, L. 1 294
and Wu, H.W.)
12 International Small Business Journal (Peel, M.J. and Wilson, N.) 1 286
13 Journal of Multinational Financial Management (Wang, Yung-Jang) 1 285
14 The International Journal of Applied Economics and Finance 1 257
(Samiloglu, F. and Demirgunes, K.)
15 Management Accounting Research (Howorth, C. and Westhead, P.) 1 254
16 American Journal of Business (Filbeck, G. and Krueger, T.M.; 2 244
Lamberson, M.)
17 Financial Management (Hill, M.D., Kelly, G.W. and Highfield, 4 219
M.J.; Smith, K.V.; Knight, W.D.; Richards, V.D. and Laughlin,
E.J.)
18 Journal of Financial and Strategic Decisions (Weinraub, H.J. and 1 210
Visscher, S.)
19 IUP Journal of Applied Finance (Nazir, M.S. and Afza, T.; Afza, T. 2 200
and Nazir, M.S.)
20 International Research Journal of Finance and Economics (Dong, H. 3 178
and Su, J.; A. Raheman, A., Afza, T., Qayyum, A. and Ahmed,
B.A.; Karaduman, H.A., Akbas, H.E, Caliskan, A.O. and
Durer, S.)
21 Rivier Academic Journal (Ganesan, V.) 1 174
22 International Management Review (Appuhami, B.A.R.) 1 170
(Continued)

Table 2. Continued
Average
(1) (2) (3) (4)
23 Journal of Banking & Finance (Ding, S., Guariglia, A. and 1 166

Knight, J.)
24 Journal of Business Research (Ban˜ os-Caballero, S., 1 166
Garc´ıa-Teruel, P.J. and Martinez-Solano, P.)
25 Pakistan Journal of Commerce and Social Sciences (Afza,T. and 1 165
Nazir, M.S.)
26 Accounting & Finance (Ban˜ os-Caballero, S., Garc´ıa-Teruel, P.J. 1 163
and Martinez-Solano, P.)
27 Journal of Quality and Technology Management (Nazir, M.S. and 1 163
Afza, T.)
28 Global Business Review (Sharma, A.K. and Kumar, S.; 2 161
Vishnani, S. and Shah, B.K.)
29 Sloan Management Review (Hawawini, G., Viallet, C. and Vora, 1 156
A.)
30 Journal of Business and Management (Mohamad, N.E.A. and 2 153
Saad, N.B.; Mehmet, S. and Eda, O.)
31 Journal of Business Logistics (Hofmann, E. and Kotzab, H.) 1 138
32 Management Decision (Rafuse, Maynard E.) 1 138
33 Journal of Business & Economics Research (Charitou, M., 1 132
Elfani, M. and Lois, P.)
34 Research in International Business and Finance (Enqvist, J., 1 131
Graham, M. and Nikkinen, J.)
35 South African Journal of Business Management (Smith, M.B. and 1 130
Begemann, E.)
36 Small Business Economics (Ban˜ os-Caballero, S., Garc´ıa-Teruel, 1 119
P.J. and Martinez-Solano, P.)
37 Managing Global Transitions (Ramachandran A. and 1 117
Janakiraman, M.)
38 The UIP Journal of Financial Economics (Singh, J.P. and 1 116
Pandey, S.)
39 Review of Finance (Kieschnick, R., Laplante, M. and 1 116
Moussawi, R.)
40 Journal of Modern Accounting and Auditing (Zariyawati, M.A., 1 112
Annuar, M.N., Taufiq, H. and Rahim, A.A.)
41 World Applied Sciences Journal (Alipour, M.) 1 108
42 Journal of Cash Management (Shulman, J.M. and Cox, R.A.K.) 1 105
43 Journal of Corporate Finance (Aktas, N., Croci, E. and 1 98
Petmezas, D.)
44 Management Accountant (Ghosh, S.K. and Maji, S.G.; 3 95
Mukhopadhyay, D.; Narware, P.C.)
(Continued)
Table 2. Continued
Average
(1) (2) (3) (4)
45 International Journal of Accounting and Taxation (Makori, D.M. 1 93

and Jagongo, A.)
46 International Journal of Trade, Economics and Finance 1 89
(Napompech, K.)
47 Journal of Small Business and Enterprise Development (Tauringana, 1 81
V. and Afrifa, G.A.)
48 Journal of Economics and International Finance (Akoto, R.K., D. 1 75
Awunyo-Vitor, D. and Angmor, P.L.)
49 International Journal of Economics and Financial Issues (Vural, G., 1 73
Sokmen, A.G. and Cetenak, E.H .)
50 Journal of Finance (Sagan, J.) 1 72
51 Journal of Global Business and Economics (Ching, H.Y., Novazzi, 1 69
A. and Gerab, F.)
52 Annales Universitatis Apulensis: Series Oeconomica (Danuletiu, 1 67
A.E.)
53 European Journal of Scientific Research (Shah, S.M.A. and Sana, 1 66
A.)
54 Canadian Journal of Administrative Sciences (Khoury, N.T., Smith, 1 65
K.V. and MacKay, P.I.)
55 African Journal of Business Management (Nyamao, N.R., Patrick, 1 64
O. and Martin, L.)
56 The Engineering Economist (Keown, A.J. and Martin, J.D.) 1 62
57 International Journal of Economics and Finance Studies 1 60
(Karaduman, H.A., Akbas, H.E., Ozsozgun, A. and Durer, S.)
58 ICFAI University Journal of Accounting Research (Singh, P.) 1 57
59 International Journal of Contemporary Research in Business (Azam, 1 55
M. and Haider, S.I.)
60 World Academy of Science, Engineering and Technology (Ogundipe, 1 52
S.E., Idowu, A. and Ogundipe, L.O.)
61 Business Management Dynamics (Owolabi, S.A. and Obida, S.S.) 1 50
Note: Table 2 presents the list of journals that have published highly cited articles on WCM in the descending order
of their average number of citations per article published.
4. Content Analysis
Since it has been found that the numbers of highly cited articles on WCM are published in relatively
lower ranked journal rather than top tier journals, it is interesting to investigate the themes of such
articles. For doing so, we have performed a content analysis of these studies and have classified them
under following five categories based on the similarity of themes shared by them as listed below:
i. Studies on the relationship between WCM and profitability of firms;

ii. Studies on the association between WC investment and capital expenditure of organizations;
Journal
of
Econo
mic Table 3. Ranking of Journals.
Surveys
(2018)
Vol.
00, No.
0, pp.
1–35
Serial Average Number of Web of
∗C Number Title of the Journal & Author(s) of the Article(s) Citations ABDC ABS Science Scopus
(1) (2) (3) (4) (5) (6) (7)
2018
1 Journal of Business Finance & Accounting (Deloof, M.) 1535 A 3 L 1.067

John
2 Journal of Applied Finance (Shin, H.H. and Soenen, L.) 971 C UL UL UL R
3 The RAND Journal of Economics (Fazzari, Steven M. and 910 4 L 3.34 E
Wiley A* VI
Petersen, Bruce C.)
E
& Sons 4 Journal of Financial Management and Analysis (Lazaridis, I. and 872 C UL UL UL
W
Tryfonidis, D.) O
Ltd.
5 International Journal of Commerce and Management (Eljelly, 809 UL UL UL 0.150 F
A.M.A.) LI
6 International Review of Business Research Papers (Raheman. A. 753 UL UL UL UL TE
and Nasr, M.; Padachi, K.) R
7 International Journal of Managerial Finance (Garcia-Teruel, P.J. 502 B 2 UL 0.326 A
and Martinez-Solano, P.; Abuzayed, B.) T
8 Business and Economics Journal (Gill, A., Biger, N. and Mathur, 477 UL UL UL UL U
R
N.) E:
9 Romanian Journal of Economic Forecasting (Michalski, G.) 326 C UL L 0.169 W
10 Research Journal of Business and Management (Mathuva, D.; 311.5 UL UL UL UL O
Falope, Olufemi I. and Ajilore, Olubanjo T.) R
11 Journal of American Academy of Business (Chiou, J.R., Cheng, 294 UL UL UL UL KI
L. and Wu, H.W.) N
12 International Small Business Journal (Peel, M.J. and Wilson, N.) 286 A 3 L 1.819 G
C
13 Journal of Multinational Financial Management (Wang, 285 B 2 UL 0.398
A
Yung-Jang) PI
14 The International Journal of Applied Economics and Finance 257 UL UL UL UL T
(Samiloglu, F. and Demirgunes, K.) A
15 Management Accounting Research (Howorth, C. and Westhead, 254 A* 3 L 2.494
P.)
16 American Journal of Business (Filbeck, G. and Krueger, T.M .; 244 UL UL UL UL
Lamberson, M.)
(Continued)
13
Journal
of
Econo
mic Table 3. Continued 14
Surveys
(2018)
Vol.
00, No.
0, pp.
1–35
(1) (2) (3) (4) (5) (6) (7)
2018
17 Financial Management (Hill, M.D., Kelly, G.W. and Highfield, 219 A 3 L 1.506
John
M.J.; Smith, K.V.; Knight, W.D.; Richards, V.D. and
Wiley Laughlin, E.J.)
18 Journal of Financial and Strategic Decisions (Financial Decisions 210 C UL UL UL
& Sons now, formerly the Journal of Financial and Strategic Decisions
(Weinraub, H.J. and Visscher, S.)
Ltd.
19 IUP Journal of Applied Finance (Nazir, M.S. and Afza, T.; Afza, 200 UL UL UL UL
T. and Nazir, M.S.)
20 International Research Journal of Finance and Economics (Dong, 178 UL UL UL UL
H. and Su, J.; A. Raheman, A., Afza, T., Qayyum, A. and
PR
Ahmed, B.A.; Karaduman, H.A., Akbas, H.E, Caliskan, A
A.O. and Durer, S.) S
21 Rivier Academic Journal (Ganesan, V.) 174 UL UL UL UL A
22 International Management Review (Appuhami, B.A.R.) 170 UL UL UL UL D
23 Journal of Banking & Finance (Ding, S., Guariglia, A . and 166 3 L 1.767 E
A*
Knight, J.) T
24 Journal of Business Research (Ban˜ os-Caballero, S., 166 A 3 L 1.815
Garc´ıa-Teruel, P.J. and Martinez-Solano, P.)
25 Pakistan Journal of Commerce and Social Sciences (Afza,T. and 165 UL UL UL UL
Nazir, M.S.)
26 Accounting & Finance (Ban˜ os-Caballero, S., Garc´ıa-Teruel, 163 A 2 L 0.607
P.J.
and Martinez-Solano, P.)
27 Journal of Quality and Technology Management (Nazir, M.S. and 163 UL UL UL UL
Afza, T.)
28 Global Business Review (Sharma, A.K. and Kumar, S.; 161 C UL UL 0.266
Vishnani, S. and Shah, B.K.)
29 Sloan Management Review (Hawawini, G., Viallet, C. and Vora, 156 A 3 L 1.231
A.)
(Continued)
Journal
of
Econo
mic Table 3. Continued
Surveys
(2018)
Vol.
00, No.
0, pp.
1–35
(1) (2) (3) (4) (5) (6) (7)
2018
30 Journal of Business and Management (Mohamad, N.E.A. and 153 C UL UL UL
John
Saad, N.B.; Mehmet, S. and Eda, O.) R
31 Journal of Business Logistics (Hofmann, E. and Kotzab, H.) 138 A 2 L 1.784 E
Wiley
32 Management Decision (Rafuse, Maynard E.) 138 B 2 L 0.613 VI
& Sons 33 Journal of Business & Economics Research (Charitou, M., 132 C UL UL UL E
Elfani, M. and Lois, P.) W
Ltd. O
34 Research in International Business and Finance (Enqvist, J., 131 B 2 UL 0.694 F
Graham, M. and Nikkinen, J.) LI
35 South African Journal of Business Management (Smith, M.B. and 130 C 1 L 0.159 TE
Begemann, E.) R
36 Small Business Economics (Ban˜ os-Caballero, S., Garc´ıa- 119 A 3 L 2.15 A
Teruel, T
P.J. and Martinez-Solano, P.) U
37 Managing Global Transitions (Ramachandran, A. and 117 UL UL UL UL R
Janakiraman, M.) E:
W
38 The UIP Journal of Financial Economics (Singh, J. P. and 116 UL UL UL UL
O
Pandey, S.) R
39 Review of Finance (Kieschnick, R., Laplante, M. 116 A* 4 L 4.249 KI
and Moussawi, R.) N
40 Journal of Modern Accounting and Auditing (Zariyawati, 112 UL UL UL UL G
M.A., Annuar, M.N., Taufiq, H. and Rahim, A.A.) C
41 World Applied Sciences Journal (Alipour, M.) 108 UL UL UL UL A
42 Journal of Cash Management (Shulman, J.M. and Cox, R.A.K.) 105 UL UL UL UL PI
43 Journal of Corporate Finance (Aktas, N., Croci, E. 98 A* 4 L 1.388 T
A
and Petmezas, D.)
44 Management Accountant (Ghosh, S.K. and Maji, S.G.; 95 UL UL UL UL
Mukhopadhyay, D.; Narware, P.C.)
45 International Journal of Accounting and Taxation (Makori, D.M. 93 UL UL UL UL
and Jagongo, A.)
(Continued) 15
Table 3. Continued
Journal
of
Econo
mic
Surveys Serial Average Number of Web of 16
(2018)
Vol.
00, No.
0, pp.
1–35 Number Title of the Journal & Author(s) of the Article(s) Citations ABDC ABS Science Scopus
(1) (2) (3) (4) (5) (6) (7)
∗C
46 International Journal of Trade, Economics and Finance 89 UL UL UL UL

2018
(Napompech, K.)
John
47 Journal of Small Business and Enterprise Development 81 C 2 UL 0.478
(Tauringana, V. and Afrifa, G.A.)
Wiley 48 Journal of Economics and International Finance (Akoto, R.K., 75 UL UL UL UL
Awunyo-Vitor, D. and Angmor, P.L.)
& Sons
49 International Journal of Economics and Financial Issues (Vural, 73 C UL UL 0.186
Ltd.
G., Sokmen, A.G. and Cetenak, E.H.)
50 Journal of Finance (Sagan, J.) 72 A* 4* L 20.973
51 Journal of Global Business and Economics (Ching, H.Y., 69 C UL L UL
Novazzi, A. and Gerab, F.)
52 Annales Universitatis Apulensis: Series Oeconomica (Danuletiu, 67 UL UL UL UL PR
A.E.) A
53 European Journal of Scientific Research (Shah, S.M.A. and 66 UL UL UL UL S
Sana, A
A.) D
54 Canadian Journal of Administrative Sciences (Khoury, N.T., 65 B 2 L 0.253 E
Smith,K.V. and MacKay, P.I.) T
55 African Journal of Business Management (Nyamao, N.R., 64 C UL L 0.159
Patrick, O. and Martin, L.)
56 The Engineering Economist (Keown, A.J. and Martin, J.D.) 62 UL UL UL UL
57 International Journal of Economics and Finance Studies 60 UL UL UL UL
(Karaduman, H.A., Akbas, H.E., Ozsozgun, A. and Durer,
S.)
58 ICFAI University Journal of Accounting Research (Singh, P.) 57 UL UL UL UL
59 International Journal of Contemporary Research in Business 55 UL UL UL UL
(Azam, M. and Haider, S.I.)
60 World Academy of Science, Engineering and Technology 52 UL UL UL UL
(Ogundipe, S.E., Idowu, A. and Ogundipe, L.O.)
61 Business Management Dynamics (Owolabi, S.A. and Obida, 50 UL UL UL UL
S.S.)
Note: Table 3 reports the name of the journals sorted in descending order of average citations received along with their rank/impact factor provided by
ABDC, ABS, Web of Science, and Scopus. ABDC classifies the listed journals into A* (highest rank), A, B, and C categories; ABS classifies them into
4*(highest rank), 4, 3, 2, and 1, Web of Science only lists selected journals (reported as “L”). Scopus provides the impact factors of the journals. “UL”
marks the unlisted journal of corresponding journal base.
Table 4. Themewise Breakup of the Reviewed Papers.
Serial Number of % of the Total

Number Theme Articles [Rounded off]
(1) (2) (3) (4)
1 WCM and profitability of firms 35 47

2 WCM and capital expenditure of organizations 3 4
3 Trade-offs between profitability and liquidity 4 5
4 Determinants of WC investments 4 5
5 Other aspects of WCM 29 39
(a) WCM across industries (eight articles; 11% of
total)
(b) WCM policies (five articles; 7% of total)
(c) WCM for small firms (five articles; 7% of
total)
(d) WCM and firm’s value (four articles; 5.5% of
total)
(e) WCM and supply chain management (four
articles; 5.5% of total)
(f) Optimizing WCM (one article; 1% of total)
(g) WCM and operating cash flow (one article; 1%
of total)
(h) Combined measures of efficiency in WCM
(one article; 1% of total)
Total 75 100
Notes: This table presents the theme wise breakup of the 75 reviewed papers.
iii. Studies on trade-offs between profitability and liquidity objectives of managers;

iv. Studies on the determinants of WC investments; and
v. Studies on the other aspects of WCM; such as:
(a) WCM across industries
(b) WCM policies
(c) WCM for small firms
(d) WCM and firm’s value
(e) WCM and supply chain management
(f) Optimizing WCM
(g) WCM and operating cash flow
(h) Combined measures of efficiency in WCM.
Table 4 presents the themewise breakup of the reviewed papers. From the table, we can infer that the
extant literature on WCM has given a major emphasis on the examination of the relationship between
the WCM efficiency and the profitability of the firms. A total of 35 most cited studies (approximately
47%) are placed under this theme. Twenty-nine reviewed articles (approximately 39%) are classified
under the other aspects of WCM group. Only four studies (approximately 5%) are reported to be
written on two themes each: determinants of WCM and trade-offs between profitability and liquidity.
Remaining three articles (approximately 4%) discuss on WCM and capital expenditure. This shows that
there is a higher concentration of studies on certain theme which may fail to give some new insights
over the period of time. The content of these papers are discussed in detail in the following subsections.

Table 5. Proxy for WCM in the Relationship between WCM and Profitability of Firms.
Number of % of Total
Proxy for WCM Articles Papers
(1) (2) (3)
CCC 27 77
[Deloof, 2003; Narware, 2004; Lazaridis and Tryfonidis, 2006; Padachi, 2006;
Raheman and Nasr, 2007; Samiloglu and Demirgunes, 2008; Falope and
Ajilore, 2009; Gill et al., 2010; Mehmet and Eda, 2009; Ramachandran and
Janakiraman, 2009; Zariyawati et al., 2009; Falope and Ajilore, 2009;
Charitou et al., 2010; Dong and Su, 2010; Gill et al., 2010; Karaduman et
al., 2010, 2011; Mathuva, 2010; Alipour, 2011; Azam and Haider, 2011;
Ching et al., 2011; Sharma and Kumar, 2011; Abuzayed, 2012; Baños-
Caballero
et al., 2012; Npompech, 2012; Owolabi and Obida, 2012; Vural et al., 2012;
Akoto et al., 2013; Enqvist et al., 2014]
NTC 2 6
[Shin and Soenen, 1998; Raheman et al., 2010]
Other Measures 6 17
[Smith, 1973; Smith and Begemann, 1997; Vishnani and Shah, 2007; Nazir and
Afza, 2008; Singh and Pandey, 2008; Danuletiu, 2010]
Total 35 100
Note: This table presents the breakup of the articles on the basis of the proxies used for WCM.
4.1 Studies on the Relationship between WCM and Profitability of Firms

In this subsection, first the different proxies are identified which have been used by 35 studies under
this category. Then the relationship between the WCM and the profitability of the firms using such
proxies has been discussed.
4.1.1 Proxies
A number of proxy measures are used by these studies for WCM and profitability of firms. They have
been listed below.
4.1.1.1 Proxy for WCM

The studies under this category have considered either Cash Conversion Cycle (CCC) or Net Trade
Cycle (NTC) or some other measures as a proxy for WCM. These other measures include different
ratios such as Total Current Assets to Total Assets, Total Current Liabilities to Total Assets, Current
Ratio, Total Current Liabilities to Fund flow, long-term loan capital to Net Working Capital, Liquidity
Index, Inventory Turnover Ratio, Working Capital Turnover Ratio, Accounts Receivable to Accounts
Payable, Delta Net Working Capital, Liquidity Ratio, Receivables Turnover Ratio, Lagged Excess Net
Working Capital, and Efficiency in Cash Management. Table 5 presents the breakup of the articles on
the basis of the proxies used for WCM. It can be observed from the table that 27 of the 35 studies that
have investigated the relationship between WCM and profitability of the firms have used CCC as a
proxy for WCM while two studies have employed NTC as a measure of WCM. Six studies have
considered the other measures as a proxy for WCM.
Table 6. Proxy for Profitability in the WCM Literature.
Profitability
Measure Formulae WCM Literature References
(1) (2) (3)
Return on Earnings before tax and Shin and Soenen,1998; Padachi, 2006; Garc´ıa-Teruel and Mart
Asset interest (1-tax rate) / ´ınez-Solano, 2007; Samiloglu and Demirgunes, 2008; Nazir
(ROA) Total Assets and Afza, 2008; Singh and Pandey, 2008; Mehmet and Eda,
2009; Falope and Ajilore, 2009; Karaduman et al., 2010,
2011; Charitou et al., 2010; Azam and Haider, 2011; Ching
et al., 2011; Sharma and Kumar, 2011
Return on Earnings before tax and Smith and Begemann,1997; Vishnani and Shah, 2007
Capital interest (1-tax rate)/
Employed (Owners’ Equity
(ROCE) +
Long-term liability)
Return on Profit after tax/Owners’ Nazir and Afza, 2008; Azam and Haider, 2011; Akoto et al., 2013
equity Equity
(ROE)
Gross (Sales-Cost of Sales) Shin and Soenen,1998; Deloof, 2003; Lazaridis and Tryfonidis,
operating /Total Assets 2006; Gill et al., 2010; Dong and Su, 2010; Alipour, 2011;
profit Baños-Caballero et al., 2012; Abuzayed, 2012; Napompech,
(GOP) 2012; and Vural et al., 2012
Net (Sales -Cost of Sales Raheman and Nasr, 2007; Ramachandran and Janakiraman, 2009;
operating -Depreciation & Zariyawati et al., 2009; Mathuva, 2010; Raheman et al., 2010;
profit Amoritization) / Total Baños-Caballero et al., 2012
(NOP) Assets
Tobin’s Q (Book value of Total Abuzayed, 2012; Vural et al., 2012
Debt
Market value of
+
Equity) / Book value of
Total Assets
Note: This table presents the measures of profit used in the WCM literature.
4.1.1.2 Proxy for Profitability of Firms

The studies classified on the profitability theme have employed various accounting measures of profit
such as Gross Operating Profit (GOP), Net Operating Profit (NOP), Return on Sales (ROS), Return on
Asset (ROA), Return on Invested Capital (ROIC), ROCE, Return on Equity (ROE), and market
performance measures such as Tobin’s Q, Alpha, and composite financial performance measure such as
the Financial Performance Index. Table 6 presents the measures of profitability used in the WCM
literature and shows how they have been computed. The total number of articles that have used such
profitability measures are reported in Table 7. According to this, there are 41 such articles as some of
them have used more than one listed performance measures. For instance, a number of studies have
used both ROA and Tobin’s Q or GOP and NOP. From Table 7, it can be inferred that ROA is the most
widely used measure of profitability of the firms which is followed by GOP. NOP is the third most used
proxy for profitability of the firms. ROIC/ROCE, ROE, Tobin’s Q, and Alpha are the other measures
used to assess the financial performance of the firms in the literature on WCM. Two studies have used
Financial Performance Index to test the impact of WCM on the profitability of the firms. Besides, there
is one study which has used ROS as a measure of profitability.
Table 7. Proxy for Profitability in the Relationship b/w WCM and Profitability of Firms.
Number of % of Total
Proxy for Profit Articles Articles
(1) (2) (3)
GOP 10 24
[Shin and Soenen,1998; Deloof, 2003; Lazaridis and Tryfonidis, 2006; Gill et al.,
2010; Dong and Su, 2010; Alipour, 2011; Baños-Caballero et al., 2012;
Abuzayed, 2012; Napompech, 2012; and Vural et al., 2012]
NOP 6 15
[Raheman and Nasr, 2007; Ramachandran and Janakiraman, 2009; Zariyawati
et al., 2009; Mathuva, 2010; Raheman et al., 2010; Baños-Caballero et al., 2012]
ROS 1 2
[Ching et al., 2011]
ROA 13 32
[Shin and Soenen,1998; Padachi, 2006; Garc´ıa-Teruel and Mart´ınez-Solano 2007;
Samiloglu and Demirgunes, 2008; Nazir and Afza, 2008; Singh and Pandey,
2008; Mehmet and Eda, 2009; Karaduman et al., 2010, 2011; Charitou et al.,
2010; Azam and Haider, 2011; Ching et al., 2011; Sharma and Kumar, 2011]
ROIC\ROCE 2 5
[Smith and Begemann,1997; Vishnani and Shah, 2007]
ROE 3 7
[Nazir and Afza, 2008; Azam and Haider, 2011; Akoto et al., 2013]
Tobin’s Q 2 5
[Abuzayed, 2012; Vural et al., 2012]
Alpha 2 5
[Shin and Soenen, 1998; Kieschnick et al., 2013]
Financial Performance Index 2 5
[Ramachandran and Janakiraman, 2009; Gill et al., 2010]
Total 41 100
Note: This table presents the breakup of the number of articles that haveused a particular measure of profit in the
WCM literature.
4.1.2 Relationship between WCM and Profitability of Firms

Using the proxies mentioned above, the researchers have explored the relationship between WCM and
profitability of firms. There are two dimensions of such approach. Few studies have investigated the
relationship of WCM at the level of composite measures such as CCC or NTC with profitability while
some other studies have examined at the level of individual components of such composite measures.
We have discussed them below.
4.1.2.1 Composite Measures of WCM

Table 8 presents the details of the studies that have examined the relationship between composite
measures of WCM (such as CCC or NTC) and profitability of the firms. It can be observed from the
table that majority of the studies (79%) have reported a negative and significant relationship between
composite measure of WCM and profitability of firms indicating that firms’ profit increases with an
improvement in their WC efficiency. Only six of the 29 studies (21%) have reported a positive and
significant association
Table 8. Relationship between Composite Measures of WCM & Profitability of Firms.
Number of % of
Relationship Articles Articles
(1) (2) (3)
Positive & Significant 6 21

[Gill et al., 2010; Sharma and Kumar, 2011; Abuzayed, 2012; Owolabi and Obida,
2012; Vural et al., 2012; Akoto et al., 2013]
Negative & Significant 23 79
[Shin and Soenen, 1998; Deloof, 2003; Narware, 2004; Lazaridis and Tryfonidis,
2006; Padachi, 2006; Raheman and Nasr, 2007; Samiloglu and Demirgunes,
2008; Falope and Ajilore, 2009; Mehmet and Eda, 2009; Ramachandran and
Janakiraman, 2009; Zariyawati et al., 2009; Charitou et al., 2010; Dong and Su,
2010; Mathuva, 2010; Raheman et al., 2010; Karaduman et al., 2010, 2011;
Alipour, 2011; Azam and Haider, 2011; Ching et al., 2011; Baños-Caballero
et al., 2012; Napompech, 2012; Enqvist et al., 2014]
Total 29 100
Note: This table presents the studies that have examined the relationship between composite measures of WCM
(such as CCC or NTC) and profitability of the firms.
between composite measure of WCM and profitability of the firms which means that firms increase their
profits by holding more inventories, following liberal credit policy and paying their suppliers early.
4.1.2.2 Individual Components of Composite Measure of WCM

In this subsection, the nature of association between the individual components of CCC or NTC and
profitability of the firms is presented. We start with reporting the findings from the reviewed studies on
the relationship between Days’ Receivable (DR) and profitability of the firms followed by the studies
on the association of Days’ Inventories (DI) and Days’ Payables (DP) with the profitability of the
firms.
4.1.2.2.1 Relationship between DR and profitability of the firms

The list of the studies that have investigated the relation between DR and profitability of the firms are
presented in Table 9. Majority of the studies (85%) have reported a negative and significant association
between DR and profitability of the firms indicating that firms increase their profits by reducing their
average collection period. Only three of the 20 studies that have reported the relation between DR and
profitability have revealed a positive and significant relation between DR and profit. They have
explained that the firms have increased their profits by following liberal credit policy, that is, extending
days of credit to their customers.
4.1.2.2.2 Relationship between DI and profitability of the firms

The list of the studies that have investigated the relation between DI and profitability of the firms are
presented in Table 10. It is noted from the table that majority of the studies (78%) have reported a
negative and significant association between DI and profitability of the firms indicating that firms
increase their profits by reducing their average inventory holding period. However, four of the total 18
studies have reported a positive and significant relation between DI and profits which suggests that
firms have increased their profits by holding more inventories which help them in avoiding the stock
out problems.
Table 9. Relationship between DR and Profitability of the Firms.
Number of % of
(1) (2) (3)

[Ramachandran and Janakiraman, 2009; Sharma and Kumar, 2011; Abuzayed,
2012]
[Deloof, 2003; Lazaridis and Tryfonidis, 2006; Padachi, 2006; Raheman and Nasr,
2007; Vishnani and Shah, 2007; Samiloglu and Demirgunes, 2008; Mehmet and
Eda, 2009; Charitou et al., 2010; Dung and Su, 2010; Gill et al., 2010;
Karaduman et al., 2010; Mathuva, 2010; Alipour, 2011; Abuzayed, 2012;
Napompech, 2012; Vural et al., 2012; Akoto et al., 2013]
Total 20 100
Note: This table lists the studies that have investigated the relation between DR and profitability of the firms.
Table 10. Relationship between DI and Profitability of the Firms.
Number of % of
(1) (2) (3)

[Smith and Begemann, 1997; Gill et al., 2010; Mathuva, 2010; Abuzayed, 2012]
[Deloof, 2003; Raheman and Nasr, 2007; Vishnani and Shah, 2007; Samiloglu and
Demirgunes, 2008; Mehmet and Eda, 2009; Charitou et al., 2010; Dong and Su,
2010; Karaduman et al., 2010; Raheman et al., 2010; Alipour, 2011; Azam and
Haider, 2011; Ching et al., 2011; Sharma and Kumar, 2011; Napompech, 2012]
Total 18 100
Note: This table lists the studies that have investigated the relation between DI and profitability of the firms.
4.1.2.2.3 Relationship between DP and profitability of the firms

The details of the studies that have examined the relation between DP and profitability of the firms are
presented in Table 11. It can be observed from the table that majority of the studies (62%) have
reported a positive and significant association between DP and profitability of the firms indicating that
firms increase their profits by delaying payment to their suppliers. However, 3 out of total 13 studies
have revealed a negative and significant relation between DP and profits which explains that firms’
profits come down when they delay the payments to their suppliers.
4.2 Studies on the Association between Investment in WC and Capital Expenditure of

Organizations
Only three of the 75 highly cited articles fall under this theme. All the three studies have reported a
negative and significant relation between investment in WC and investment in fixed assets (capital
expenditure
Table 11. Relationship between DP and Profitability of the Firms.
Number of % of
(1) (2) (3)

[Lazaridis and Tryfonidis, 2006; Vishnani and Shah, 2007; Ramachandran and
Janakiraman, 2009; Dong and Su, 2010; Mathuva, 2010; Alipour, 2011; Azam
and Haider, 2011; Abuzayed, 2012]
[Deloof, 2003; Raheman and Nasr, 2007; Charitou et al., 2010; Karaduman et al.,
2010; Sharma and Kumar, 2011]
Total 13 100
Note: This table lists the studies that have investigated the relation between DP and profitability of the firms.
or Capex) of the firms. Among these, Fazzari and Petersen (1993) have reported that WC investments
of U.S. manufacturing firms have negative and significant association with the fixed asset investment
which indicates that firms reduce (increase) their investment in WC in order to increase (decrease) their
investment in fixed assets. Furthermore, WC investments are having a higher level of sensitivity to the
fluctuations in the cash flows of firms. Another study by Appuhami (2008) has concluded that the
working capital requirements (WCR) of the Thai listed firms have a negative and significant
relationship with their investments in Capex indicating that firms improve their WC efficiency with the
purpose of investing in fixed assets. This study has reported a negative and significant association
between the WCR and the operating cash flows of the firms. In the last study on this theme, Ding et al.
(2013) state that the Chinese firms with higher investments in WC are having a higher magnitude of
sensitivity to cash flow fluctuations and their investments in Capex tends to be having a lower level of
sensitivity to fluctuations in cash flow. This essentially reveals that firms opt to increase or decrease
their investments in WC according to their Capex investment requirements and the fluctuations in cash
flow. Firms with higher investments in working capital are organizations with higher financial
constraints coupled with more investment opportunities. They conclude that the financially constrained
Chinese firms may focus on improving their WC efficiency in order to minimize the negative effects of
their financial constraints on their investment in fixed assets.
4.3 Studies on the Trade-Offs between Profitability and Liquidity Objectives of Managers
Within our sample, only four studies have examined the relationship between the liquidity and
profitability of the firms. Knight (1972) argues for integrating mathematical components into the
accounting-based budgeting process. He points out that managers need to opt for satisficing rather than
optimization of the investment in WC which is quite practical as there are uncertainties and
involvement of complex interrelationships among the financial and nonfinancial variables. Ejjely
(2004) reports a negative and significant relation between liquidity (proxied by current ratio or cash
gap) and profitability (proxied by net operating income) of the firms operating in Saudi Arabia. This
indicates that firms’ profitability come down for an increase in their liquidity. Furthermore, the study
concludes that current ratio is the most important liquidity measure that impacts the profitability of the
firms. The third study falling under this theme is of Baños-Caballero et al. (2012), which reports
the existence of an inverted U-shaped association between investment in WC and profitability of
nonfinancial listed firms operating in United Kingdom. This means that there is a trade-off between
profitability and liquidity for firms’ investment in
working capital and therefore firms should achieve optimality in their WC investment in order to
maximize their value. Richards and Laughlin (1980) state that the flow concept of liquidity can be
developed by extending the static balance sheet analysis on liquidation value to include income
statement measures of the operating activity of the firm. They further state that by incorporating the
accounts receivables and inventory turnover measures in the operating cycle concept, a more
appropriate view of the liquidity management can be done than the reliance on current ratio or acid test
ratio indicators.
4.4 Studies on the Determinants of Investment in Working Capital of Organizations

Four highly cited articles out of 75 falls under this category. According to Chiou et al. (2006), debt
ratio and operating cash flow are the factors that determine the WC investment of the U.S. firms. They
also conclude that there is no evidence for the impact of business indicator, company growth, industry
effect, firm size, and firm performance on the WC investment of the firms. Nazir and Afza (2009b),
based on the listed Pakistani manufacturing firms, report that operating cycle, ROA, and Tobin’s Q are
the factors which are having positive and significant association with WCR of the firms and leverage
has a negative and significant impact on WC needs of the firms. Hill et al. (2010) conclude that
operating cash flow and size of the firm significantly affect the WCR of the firms positively and sales
growth, sales volatility, financial distress, and market to book ratio of the firms impact their WC needs
in a negative and significant manner. Finally, Baños-Caballero et al. (2010), on Spanish Small Medium
Enterprises (SMEs), conclude that operating cash flow, age of the firm and lagged CCC have positive
and significant relationship with CCC of the firms while leverage, growth opportunities, investment in
fixed assets, and ROA of the SMEs have negative and significant impact on their CCC.
4.5 Studies on the Other Aspects of WCM

Under this theme, there are 29 studies which describe the aspects other than the above-stated four themes
on WCM. Stated below are the other aspects of WCM:
(a) WCM across industries (eight articles; 11% of the total) (Hawawini et al., 1986; Peel and Wilson,
1996; Ghosh and Maji, 2004; Mukhopadhyay, 2004; Filbeck and Krueger, 2005; Shah and Sana,
2006; Ganesan, 2007; Makori and Jagongo, 2013)
(b) WCM policies (five articles; 7% of the total) (Weinraub and Visscher, 1998; Khoury et al., 1999;
Nazir and Afza, 2007, 2009a; Michalski, 2007)
(c) WCM for small firms (five articles; 7% of the total) (Lamberson, 1995; Howorth and Westhead,
2003; Garc´ıa-Teruel and Mart´ınez-Solano, 2007; Nyamao et al., 2012; Tauringana and Afrifa,
2013)
(d) WCM and firm’s value (four articles; 5.5% of the total) (Mohamad and Saad, 2010; Ogundipe et
al., 2012; Kieschnick et al., 2013; Aktas et al., 2015)
(e) WCM and supply chain management (four articles; 5.5% of the total) (Rafuse, 1996; Keown and
Martin, 1977; Singh, 2008; Hofmann and Kotzab, 2010)
(f) Optimizing WCM (one article; 1% of the total) (1955)
(g) WCM and operating cash flow (one article; 1% of the total) (Wang, 2002)
(h) Combined measures of efficiency in WCM (one article; 1% of the total) (Shulman and Cox, 1985)
Sagan (1955), perhaps, is the first study to propose a theory on WCM. Filbeck and Krueger (2005)
have reported the differences in WCM among various industries. The relationship between the size of
inventory and WCM is studied by Singh (2008). A number of researchers have examined the
differences in the WCM practices of firms; for instance, Khoury et al. (1999) provide a comparison of
WC practices in three countries (Canada, the United States, and Australia). WCM practices in SMEs of
United Kingdom are studied by Peel and Wilson (1996) and Howorth and Westhead (2003). Hawawini
et al. (1986) and Weinraub and Visscher (1998) have reported the industry practices on aggressive and
conservative WC
practices. Mukhopadhyay (2004) and Ghosh and Maji (2004) have studied the working capital
practices in Indian heavy engineering firms and Indian cement industry, respectively. Michalski (2007)
has proposed a portfolio management approach in decision making related to trade credit. Nazir and
Afza (2007, 2009a, 2009b) examine the impact of aggressive WCM policy on profitability of the firms.
Rafuse (1996) and Hofmann and Kotzab (2010) have suggested to perform WCM using the supply
chain approach. The role of business cycles and economic activities in the relationship between WCM
and profitability is reported by Lamberson (1995). Keown and Martin (1977), in their study have
proposed a goal programming model for WCM. The last theme is on the combined measures of WCM
wherein Shulman and Cox (1985) have provided an integrative approach by developing two new
proxies (measures) for WCM, namely, Net Liquid Balance (NLB) and WCR. They found that NLB is
better than traditional indicators like current ratio and quick ratio in terms of predicting crisis and
liquidity of a firm.
Based on the content analysis of the studies under different themes, it is evident that there is a
concentration of studies in one particular category. However, there is a dearth of quality studies on
other themes. Moreover, the same bias can be observed while analyzing the different proxies used by
the researchers. Some of the proxies (such as CCC or ROA) are repeatedly utilized while new innovat-
ive proxy measures are rare. This probably better explains the reason why so many highly cited articles
are published in relatively lower category journals. Therefore, it is very important to look for future
scope of research on WCM so that more innovative studies are performed by eminent researchers. This
would definitely help improving WCM by the globally listed companies.
5. Future Research Agenda on WCM

While discussing the future research agenda on WCM, it is imperative to know how the comprehensive
measures of efficiency of WCM have been evolved over time. The conventional measures of such
efficiency are current ratio and quick ratio (Emery, 1984; Lamberson, 1995; Nilsson, 2010; Valipour et
al., 2012). However, since these two measures are static in nature as they do not consider the element of
time, their suitability in examining the firm’s WC efficiency has been questioned by many researchers
(Emery, 1984; Kamath, 1989). Subsequently, some dynamic measures such as interval measure ratio
and operating cycle became popular (Chakraborty, 1973; Fadel and Parkinson, 1978; Hawawini et al.,
1986; Raheman et al., 2010). These measures, although superior to any static measure, are deficient as
a cash flow measure since they do not consider the current liability commitments. Gitman (1974)
introduces the cash conversion concept as a crucial element of WCM. The total cash cycle is defined as
the number of days from the time the firm pays for its purchases of the most basic form of inventory to
the time the firm collects from the sale of its finished product. Richards and Laughlin (1980) have
operationalized the cash cycle concept by reflecting the net interval between cash expenditures on
purchases and the ultimate recovery of cash receipts from product sales. It claims that this method is
superior to other forms of WC analysis that rely on ratio analysis. Gentry et al. (1990) develop a
modified version of CCC, better known as the weighted cash conversion cycle (WCCC), which scales
the timing by the amount of fund in each step of the cycle. The weights are calculated by dividing the
amount of cash tied up in each component by the final value of the component. Thus, WCCC includes
both the number of days and the amount of fund that is tied up at each stage of the cash cycle. WCCC
is extended into adjusted cash conversion cycle (ACCC) (Viskari et al., 2012). The calculation logic of
ACCC is based on WCCC but it can be used at customer or product level. The modifications present
the efficiency of WCM in days which is similar to the original CCC. The length of NTC is also used as
a measure of WC efficiency. NTC is basically equal to the CCC where all three components are
expressed as a percentage of sales and NTC as a proxy for additional WC needs as a function of the
projected sales growth (Shin and Soenen, 1998). Recently, Nobanee and AlHajjar (2014) propose an
optimal CCC, an optimal NTC, and an optimal operating cycle as more accurate and comprehensive
measures of WCM. Analytical definitions of all these measures are provided in the Appendix.
Future researches on WCM may start using these currently evolved measures such as optimal cash
conversion to address various issues related to WCM. This study, based on content analysis of 75
highly cited articles, has identified few more themes on WCM which the researchers may address with
newly developed efficiency measures. The themes are:
1. Impact of WC efficiency on the other corporate finance decisions;

2. Relationship between WC efficiency and the systematic risks of firms;
3. Impact of WC efficiency on the value of firms using multiples as proxies for value of firms;
4. Effect of optimal WC investment on the risk and return of firms;
5. Influence of Corporate Governance (CG) on the WC efficiency of firms;
6. Industrywise benchmarks for investment in WC;
7. Relation between individual components of WC and profitability of firms using appropriate
proxies for profitability;
8. Measuring the impact of WCM on the financial performance of firms using quarterly data instead
of annual data.
5.1 Impact of Working Capital Efficiency on the Other Corporate Finance Decisions
According to Damodaran (2002), corporate managers deal with three basic interdependent decisions,
namely, investment decisions, financing decisions, and dividend decisions. Investments decisions deal
with deciding on investment in long-term projects (known as capital budgeting decisions) and on
investment in short-term working capital (known as working capital decisions). Therefore, it would be
interesting if the following research questions can be investigated by future studies:
. Whether firms with higher level of WC efficiency invest in value creating projects (capital
expenditure investments)?
. Do firms with sound WCM borrow more or issue more debt?
. Whether organizations that are efficient in WCM pay higher dividends to their shareholders?
. Do firms with a superior ability to manage WCM hold higher cash compared to those firms who are
not efficient in WCM?
5.2 Relationship between Working Capital Efficiency and the Systematic Risk of Firms
Systematic risk of a firm is undiversifiable and is measured by beta. It is very important for a firm to
achieve highest WC efficiency when the systematic risk due to macro level factor is very high.
Therefore, it is necessary to explore the insights for the following research questions:
. Whether WCM efficiency of firms results in a lower asset beta?
. Does WCM efficiency lead to a reduced levered beta for firms?
5.3 Impact of Working Capital Efficiency on the Value of Firms Using Multiples as Proxies for
Value of Firms
The literature on WCM consists of studies that have employed various accounting measures such as
ROA, ROC, ROE, GOP, and NOP and market measures of Tobin’s Q & risk adjusted return (alpha) (as
seen in Tables 6 and 7). One could hardly come across the research work that has employed any of the
equity value or firm value-based multiples as proxies for the value of the firm. Hence future research
works can examine the following research questions:
. What is the impact of WC efficiency on the equity-based multiples (such as Price to Earnings,
Price to Book, and Price to Sales) of the firms?
. How does WC efficiency affect the firm value multiples (such as Enterprise Value to EBIT,
Enterprise
Value to EBITDA, and Enterprise Value to Sales) of the firms?
5.4 Effect of Optimal Working Capital Investment on the Risk and Return of Firms
Baños-Caballero et al. (2012) point out the existence of an inverted U-shaped relationship
between working capital and profitability of firms. The research questions that come to the fore are:
. How to find out (measure/compute) the optimal investment in WC for a firm?
. Whether firms with optimality in their WC investments generate better (superior/excess)
shareholder
returns (measured by alpha or absolute shareholder returns) compared to firms with suboptimal
investment in WC?
. Whether organizations with optimal investment in WC have lower levered and unlevered beta
compared to those who do not have optimality in their WC investments?
. Do firms with optimality in their WC investments pay higher dividends (measured by dividend
payout ratio) compared to firms with suboptimal investment in WC?
. What is the impact of WC optimality on the equity-based multiples (such as Price to Earnings,
Price
to Book, and Price to Sales) of the firms?
. How does WC optimality affect the firm value multiples (such as Enterprise Value to EBIT,
Enterprise
Value to EBITDA, and Enterprise Value to Sales) of the firms?
5.5 Influence of CG on the Working Capital Efficiency of Firms

The extant literature comprises numerous articles which have produced concrete evidence for the
impact of CG on the financial performance of firms (Yu, 2011; Abor and Fiador, 2013; Shank et al.,
2013; Mishra and Mohanty, 2014; Teti et al., 2016; Kowalewski, 2016). Hence, it is imperative to
investigate the following research questions:
. Whether individual CG indicators such as the composition and characteristics of Board, Audit
Committee, Nomination and remuneration committee, corporate social responsibility committee,
risk management committee, and stakeholders’ relationship committee impact the WC efficiency
of firms?
. Does the composite CG indicator (aggregate of the individual components of CG) affect the WC
efficiency of organization?
5.6 Industrywise Benchmarks for Investment in Working Capital

Many researchers have ignored the differences among industries while reporting the relation between
WCM and profitability of firms. However, some of them have reported the differences among
industries in the management of WC (Hawawini et al., 1986; Weinraub and Visscher, 1998; Filbeck
and Krueger, 2005). Therefore, developing industrywise benchmarks for WCM become relevant and
the following research questions can be examined by the future research works:
. Can benchmarks on WCM for various industries be developed?
. What are the differences in the WCM practices of various industries? And how do they affect the
financial performance of industries?
5.7 Relation between Individual Components of Working Capital and Profitability of Firms
Using Appropriate/Alternate Proxies for Profitability
The literature has reported studies that have investigated the relation between the composite measure of
WCM efficiency (CCC or NTC), individual measures of WCM efficiency (namely, DR, DI, and DP)
and accounting measures of profitability of firms (such as ROA, ROE, ROC, GOP, and NOP). The
limitation of considering ROA, ROE, ROC, GOP, and NOP as proxies for profitability is that these
measures do not reveal the relationship in an appropriate/explicit manner. For instance, rather than
profit, sales revenue captures the impact of the changes in DR and DI better. Similarly, instead of
profit, Cost of Goods Sold (COGS) reveals completely the impact of the changes in DI and DP. Hence,
the researchers may explore the following research questions:
. How to measure the optimal DR, DI, and DP for firms?
. What is the impact of DR on Sales Revenue of firms?
. What is the effect of DI on the sales revenue and COGS of organizations?
. How does DP impact the COGS of the companies?
5.8 Measuring the Impact of WCM on the Financial Performance of Firms Using Quarterly
Data Instead of Annual Data
The existing studies on WCM have considered annual data of the dependent, independent, and control
variables. It has been reported in the literature that companies have a tendency to manipulate their
accounting figures in their annual reports (Stolowy and Breton, 2004). Hence, it is important to
examine the following research question:
. Whether usage of quarterly data for the variables makes a difference in the results for the above-
stated questions?
6. Conclusion
In this study, an SLR of the research works on WCM has been performed using Google Scholar.
Articles with citation of 50 and above as of June 5, 2018 are considered for the detailed citation and
content- based analysis. The citation-based analysis suggests that there is a growing popularity of
studies related to WCM in recent times. However, majority of the impactful studies are published in
relatively lower category journals. This further intrigues us to explore the content of such studies.
Based on the content, the studies are classified under five different themes. It is found that majority of
the highly cited articles have examined the relation between the WCM and profitability of the firms.
Moreover, repetitive uses of few proxies in such studies have also been identified. This finding most
probably explains the reason behind so many highly cited articles getting published in relatively lower
category journals. In view of this, the study tries to explore further scope of research on WCM and lists
down potential research questions for the future researches.
The paper contributes significantly to academics and practitioners by providing insights through a
detailed systematic review of the existing research studies on WCM. First, it provides a comprehensive
description on the widely used proxies for WCM and profitability of firms. Then, it describes the nature
of relationship between WCM and profitability of firms while WCM is expressed both as a composite
measure and as individual components of such composite measure. Finally, it spells out the directions
for future research work which may enable the impactful studies on WCM to get published in top tier
journals. To the best of our knowledge, this study is the first one that takes a detailed stock of what has
been studied so far on WCM and there from identifies scope for further research work on WCM. One
of
the limitations of this review paper is that it has not considered studies with citations of less than 50
and the findings may change if one includes all the studies irrespective of the number of citations.
Moreover, it may ignore few recent and important studies in process. Another limitation of the study is
that it does not offer details on the country studied, industries studied, nature of paper (conceptual or
empirical or survey paper), and the statistical tool used by the reviewed papers as they are already
reported by Singh and Kumar (2014).
Notes
1. https://www.pwc.com/gx/en/services/advisory/deals/business-recovery-restructuring/working-
capital-opportunity.html
2. Relationship between WCM and profitability of firms: Smith, 1973; Smith and Begemann, 1997;
Shin and Soenen, 1998; Deloof, 2003; Narware, 2004; Lazaridis and Tryfonidis, 2006; Padachi,
2006; Raheman and Nasr, 2007; Vishnani and Shah, 2007; Nazir and Afza, 2008; Singh and
Pandey, 2008; Samiloglu and Demirgunes, 2008; Mehmet and Eda, 2009; Zariyawati et al., 2009;
Ramachandran and Janakiraman, 2009; Falope and Ajilore, 2009; Gill et al., 2010; Mathuva, 2010;
Dong and Su, 2010; Charitou et al., 2010; Karaduman et al., 2010; Raheman et al., 2010; Danuletiu,
2010; Sharma and Kumar, 2011; Alipour, 2011; Karaduman et al., 2011; Ching et al., 2011; Azam
and Haider, 2011; Baños-Caballero et al., 2012; Abuzayed, 2012; Npompech, 2012; Vural et al.,
2012; Owolabi and Obida,2012; Akoto et al., 2013; Enqvist et al., 2014.
3. Relationship between WCM and the capital expenditure or investment in fixed assets of firms:
Fazzari and Petersen, 1993; Appuhami, 2008; Ding et al., 2013.
4. Trade-offs between profitability and liquidity objectives of managers: Knight, 1972; Richards and
Laughlin, 1980; Eljelly, 2004; Baños-Caballero et al., 2012.
5. The determinants of investment in working capital of organizations: Chiou et al., 2006; Nazir and
Afza, 2009a; Baños-Caballero et al. 2010; Hill et al., 2010.
6. The other aspects of WCM: Sagan, 1955; Keown and Martin, 1977; Shulman and Cox, 1985;
Lamberson, 1995; Peel and Wilson, 1996; Rafuse, 1996; Hawawini et al., 1986; Weinraub and
Visscher, 1998; Khoury et al., 1999; Yung-Jang Wang, 2002; Howorth and Westhead, 2003;
Mukhopadhyay, 2004; Ghosh and Maji, 2004; Filbeck and Krueger, 2005; Shah and Sana, 2006;
Ganesan, 2007; Michalski, 2007; Nazir and Afza, 2007; Garc´ıa–Teruel and Mart´ınez–Solano, 2007;
Singh, 2008; Nazir and Afza, 2009; Mohamad and Saad, 2010; Hofmann and Kotzab, 2010;
Nyamao et al., 2012; Ogundipe et al., 2012; Tauringana and Afrifa, 2013; Kieschnick et al., 2013;
Makori and Jagongo, 2013; Aktas, 2015.
7. ABDC, ABS, Web of Science, and Scopus are the most recognized reviewers of quality journals,
especially in the area of business. This study only considers the latest (till June 5, 2018)
categorization of journals or impact factor provided by them.
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data.asp
Appendix: Analytical Definitions of Working Capital
WCM Proxy for WCM Formulae Literature
WCM liquidity
Current Ratio (CR) Current Ratio Current assets/Current Lamberson (1995); Nilsson (2010)
measure =
liabilities
Quick ratio (QR) Quick Ratio (Current assets – Emery(1984); Valipour et al. (2012)
=
Inventories)/ Current liabilities
Net Liquid Balance Net liquid balance (NLB) (Cash and Shulman and Cox (1985); Hawawini
=
(NLB) Cash equivalents short- term et al. (1986); Shulman and
+
investment) – (Short-term debt Dambolena (1986)
+
long-term debt maturing in a year)
WCM efficiency Number of Days (Inventories * 365)/ Cost of Sales Filbeck and Krueger (2005); Raheman
measure Inventories and Nasr (2007); Arunkumar and
Radharamanan (2011)
Number of Days (Accounts Receivable * 365)/Sales Filbeck and Krueger (2005); Raheman
Accounts and Nasr (2007); Arunkumar and
Receivables Radharamanan (2011)
Number of Days (Accounts Payable * 365)/ Purchases Filbeck and Krueger (2005); Raheman
Accounts Payables and Nasr (2007); Arunkumar and
Radharamanan (2011)
Operating cycle Days in Inventory Days in Accounts Gill et al. (2010)
+
Receivables
Working Capital Accounts Receivable Inventories Hill et al. (2010)
+
Requirement –Accounts Payable Accrued
+
Expenses Other Payable
+
Net Trade Cycle NTC (Inventory Accounts Shin and Soenen (1998); Ganesan
= +
(NTC) receivables – Accounts payable) * (2007); Raheman et al. (2010)
365/sales
WCM efficiency Cash Conversion Cash conversion cycle (number of Deloof (2003); Lazaridis and
=
measure Cycle (CCC) days of accounts receivable Tryfonidis (2006); Padachi (2006);
+
number of days of inventories)– Shah and Sana (2006); Garcia
number of days of accounts payable -Teruel and Martinez -Solano (2007);
Raheman and Nasr (2007);
Samiloglu and Demirgunes (2008);
Mehmet and Eda (2009);
(Continued)
Continued
WCM Proxy for WCM Formulae Literature
Zairyawati et al. (2009);

Ramachandran and Janakiraman
(2009); Gill et al. (2010);
Mathuva (2010); Dong and Su
(2010); Mohamad and Saad
(2010); Raheman et al. (2010);
Charitou et al. (2010);
Karaduman et al. (2010, 2011);
Sharma and Kumar (2011);
Alipour (2011); Ching et al.
(2011); Azam and Haider (2011);
Baños-Caballero et al. (2012);
Abuzayed (2012); Npompech
(2012); Vural et al. (2012);
Makori and Jagongo (2013);
Tauringana and Afrifa (2013);
Akoto et al. (2013)
Weighted Cash Modified version of cash conversion Gentry et al. (1990)
Conversion cycle called the weighted cash
Cycle (WCCC) conversion cycle (WCCC), which
scales the timing by the amount of
funds in each step of the cycle. The
weights are calculated by dividing
the amount of cash tied up in each
component by the final value of the
component.
Adjusted Cash The calculation logic of ACCC is based Viskari et al. (2012)
Conversion on WCCC but it could be used on
Cycle (ACCC) customer or product levels. The
modifications present the efficiency
of working capital management in
days which is similar to the original
CCC.
WCM Optimal Cash Optimal Cash Conversion Cycle Nobanee and AlHajjar (2014)
=
efficiency Conversion (Optimal Inventory/Cost of Goods
measure Cycle Sold) * 365 (Optimal Receivables/
+
Sales) * 365 – (Optimal
Payables/Cost of Goods sold) * 365
Optimal Net Optimal Net Trade Cycle (Optimal
=
Trade Cycle Inventory/Sales) * 365 (Optimal
+
Receivables/ Sales) * 365 – (Optimal
Payables/Sales) * 365
Optimal Optimal Operating Cycle (Optimal
=
Operating Inventory/Cost of Goods Sold) * 365
Cycle
+ (Optimal Receivables/ Sales) * 365
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REVIEW OF LITERATURE ON WORKING CAPITAL MANAGEMENT AND FUTURE

Article in Journal of Economic Surveys · January 2018

11 PUBLICATIONS 43 CITATIONS 6 PUBLICATIONS 37 CITATIONS

Working Capital Management View project

REVIEW OF LITERATURE ON WORKING

∗C 2018 John Wiley & Sons Ltd.

i. Relationship between WCM and profitability of firms; 2

Journal of Economic Surveys (2018) Vol. 00, No. 0, pp. 1–35

∗C 2018 John Wiley & Sons Ltd.

Step 2: Description and Classification of Selected research papers

Step 3: Detailed Content and Citation analysis of selected research

Step 4: Reporting of findings and scope for further research papers

Figure 1. Systematic Literature Review (As Proposed by Tranfield et al., 2003).

3.1 Studies on WCM

Serial Number of Year of

1 Does WCM Affect Profitability of Belgian Firms? – Deloof, M. 1535 2003

Journal of Economic Surveys (2018) Vol. 00, No. 0, pp. 1–35

∗C 2018 John Wiley & Sons Ltd.

Serial Table 1. Continued

Journal of Economic Surveys (2018) Vol. 00, No. 0, pp. 1–35

∗C 2018 John Wiley & Sons Ltd.

Serial Number of Year of

41 The Impact of WCM on Firm Profitability in Different Business 131 2014

59 The Relationship between WCM and Profitability: Evidence from 77 2011

3.2 Journals on WCM

3.3 Ranking of Journals

Table 2. Journals on WCM.

1 Journal of Business Finance & Accounting (Deloof, M.) 1 1535

Journal of Economic Surveys (2018) Vol. 00, No. 0, pp. 1–35

∗C 2018 John Wiley & Sons Ltd.

23 Journal of Banking & Finance (Ding, S., Guariglia, A. and 1 166

45 International Journal of Accounting and Taxation (Makori, D.M. 1 93

i. Studies on the relationship between WCM and profitability of firms;

1 Journal of Business Finance & Accounting (Deloof, M.) 1535 A 3 L 1.067

46 International Journal of Trade, Economics and Finance 89 UL UL UL UL

Serial Number of % of the Total

1 WCM and profitability of firms 35 47

iii. Studies on trade-offs between profitability and liquidity objectives of managers;

∗C 2018 John Wiley & Sons Ltd.

4.1 Studies on the Relationship between WCM and Profitability of Firms

4.1.1.1 Proxy for WCM

4.1.1.2 Proxy for Profitability of Firms

4.1.2 Relationship between WCM and Profitability of Firms

4.1.2.1 Composite Measures of WCM

Positive & Significant 6 21

4.1.2.2 Individual Components of Composite Measure of WCM

4.1.2.2.1 Relationship between DR and profitability of the firms

4.1.2.2.2 Relationship between DI and profitability of the firms

Positive & Significant 3 15

Table 10. Relationship between DI and Profitability of the Firms.

Positive & Significant 4 22

4.1.2.2.3 Relationship between DP and profitability of the firms

4.2 Studies on the Association between Investment in WC and Capital Expenditure of

Positive & Significant 8 62

4.4 Studies on the Determinants of Investment in Working Capital of Organizations

4.5 Studies on the Other Aspects of WCM

5. Future Research Agenda on WCM

1. Impact of WC efficiency on the other corporate finance decisions;

5.5 Influence of CG on the Working Capital Efficiency of Firms

5.6 Industrywise Benchmarks for Investment in Working Capital

Appendix: Analytical Definitions of Working Capital

WCM Proxy for WCM Formulae Literature