Working Capital Policy:

Working capital policy of firm refers to the investment level of firm in its current assets to
achieve its desired target. A lot of Research Specialists have studied the working Capital policy
from different views and in different kind of environment. For instance, in a study it is said that,
Managing a working Capital Policy has a very significant impact on the financial performance
of firms. Working captial is consider as internal funding resource of the firm that provides
Liquidity to firms to funds, its short term obligations. Aktas et al., (2015); Deloof, (2005);
Yazdanfar & Ohman, (2014). Moreover one studies show that holding more working capital
could result in a high cost of liquidity while holding low working capital could have a high cost
of illiquidity. (Panda & Nanda, 2018). In the Pakistani context, Afza and Nazir, (2007) found a
negative relationship between the profitability measures of the firms and the degree of
aggressiveness on working capital investment and financing policies for 204 public limited
companies that were listed at Karachi stock Exchange for the period 1998-2005. As the results of
Study indicate that the firm with more aggressive working capital policy may not be able to
generate more profit proving the negative relation of Working capital policy and profitability of
the firm.
Financial Performance:
The financial performance of a firm is the outright evaluation of a company’s overall
position in categories which include the revenue, expenses, assets, liquidity, equity and
altogether performance. In a more broad sense it actually refers to the degree to which the
financial objectives of the company have been accomplished. Moreover it’s a subjective concept
which explains how well a company uses its assets and grows revenue while managing its debts.
A study by Pestonji and Wwichitsathian (2019) found the relationship between working capital
investment policy and the profitability of a firm to be highly significant. A study by (Benrquia
and Jabbouri, 2021), shows that the monitoring of Working capital is crucial to assure the
sufficient liquidity level and to ensure accurate daily operations while also enhancing the
performance and value of the firm.
Firm Size:
“Size-Performance” theory (Demsetz & Lehn, 1985) suggests that there is a positive
relationship between the size of a firm and its financial performance, with larger firms tending to
generate more revenue, profit and higher market value compared to smaller firms .A study by
Vakilifard and Taslimi (2021) found that larger firms tend to have better financial performance
than smaller ones due to the economies of scale they enjoy. Similarly, Karabag and Kilincarsan
(2021) discovered that larger firms have a higher return on assets and equity as compared to
small firms. However, the “Resource-Based” theory (Barney, 1991) offers a different perspective
and argues that the relationship between firm size and performance is not always positive but
dependent on the availability of resources. A study by Ljubownikow and Servali (2020) suggests
that larger firms tend to have lower return on assets than smaller ones because of their difficulty
in adapting to changing market conditions. There are some scholars who have found that there is
no impact of firm size on firm financial performance. For instance, Study by Arora and Sharma
(2019) revealed that in different sector industries there is no consistent link of firm size on firm
financial performance.
Firm Age:
 In business and economics, the firm age means the number of years a firm or
organization has been in presence since its establishment. The age of a firm can also determine
its success, with companies that have been around for a longer time being perceived as more
reliable and trustworthy than new and unproven ones. Firm age has been found to have a
substantial effect on firm financial performance in various studies. Younger firms are generally
associated with higher growth rates and greater financial risk due to their lack of reputation and
market presence. On the other hand, older firms may have a more established reputation,
customer base, and access to resources, which can contribute to more stable financial
performance. One study by Lu and Beamish (2006) found that younger firms had positive
relationship between firm age and financial performance, with the effect becoming negative as
the firm aged. Another study by Mahmood and Hanafi (2013) found that older firms had better
financial performance due to their greater access to resources and market power. For example, a
study by Nilsson and Rapp (2013) found no substantial relationship between firm age and
financial performance. Overall, there is a complex relationship between firm age and financial
performance and it depends on various factors such as industry, market conditions, and
management practices.

Working Capital Policy References:

Oinam, D. R. (2022). Corporate governance and financial performance: A study on Indian
manufacturing companies. Journal of Financial Reporting and Accounting.
Singh, J., & Sharma, S. K. (2021). Sustainable supply chain management: A comprehensive
review and future research directions. International Journal of Logistics Management, 32(1), 1-
37.
Efinance Management. (n.d.). Working capital policy: Relaxed, restricted, and moderate.

Firm Financial Performance:

Mendoza, S., Guan, J., & Tamayo, A. (2022). Working Capital Management and Firm
Performance Nexus in Emerging Markets: Do Financial Constraints Matter?. Journal of
Economic Analysis and Strategy, 15(1), 62-83.
Pestonji, C., Wichitsathian, S. (2019). Impact of Working Capital policy on Firms
Performance:An empirical Study on Thai listed Companies in production Sector. Journal of
Asia-Pacific Contemporary Finance and development, 26(1), 39-51.

Firm Size References:

Arora, R., & Sharma, G. (2019). Does firm size matter for financial performance? Evidence from
Indian industries. Journal of Indian Business Research, 11(1), 1-19.

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of

Management, 17(1), 99-120.

Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and
consequences. Journal of Political Economy , 93(6), 1155-1177.

Karabag, S. F., & Kilincarslan, E. (2021). The Effect of Firm Size on Financial Performance: An
Empirical Analysis from Turkey. Journal of Management, Economics, and Industrial
Organization, 5(1), 27-41.

Ljubownikow, S., & Servali, H. (2020). Effect of Firm Size on Financial Performance: Empirical
Evidence from Serbia. Economic Annals-XXI, 178(3-4), 16-20.
Vakilifard, H. R., & Taslimi, M. S. (2021). The Impact of Firm Size on Financial Performance:
Evidence from Iranian Insurance Industry. Journal of Accounting and Finance in Emerging
Economies, 7(1).

Firm Age References:

Lu, J. W., & Beamish, P. W. (2006). The internationalization and performance of SMEs.
Strategic Management Journal, 27(8), 781-801

Mahmood, R., & Hanafi, N. (2013). The relationship between firm age and financial
performance: Evidence from Malaysian public listed companies. International Journal of
Business and Management, 8(19), 44-152.

Nilsson, H., & Rapp, B. (2013). The effect of firm age on performance: A conceptual framework
and empirical evidence. Journal of Small Business Management, 51(1), 1-22.