Working capital management, cash flow and SMEs’ performance

Afrifa, G. and Tingbani, I. (2018) Working capital management, cash flow and SMEs’ performance. Int. J. Banking, Accounting and Finance, 9 (1).

PDF (Paper)
16816_2578411036910001000 (1).pdf - Accepted Version

Download (789kB) | Preview


Purpose – The paper presents comprehensive evidence on the relationship between Working Capital Management (WCM) and SMEs’ performance by taking into consideration the plausible effect of cash flow.

Design/methodology/approach – The paper adopts a panel data regression analysis on a sample of 802 British quoted small and medium enterprises listed on the Alternative Investment Market for the period from 2004 to 2013.

Findings – The results of the study demonstrate the importance of cash flow on SMEs’ WCM and performance. According to our findings, WCM has a significantly negative impact on SME performance. However, with available cash flow, we find a significantly positive relationship. Additionally, our evidence revels that cash flow constrained (non-constrained) SMEs are able to enhance their performance through decreased (increased) investment in WCM.

Practical implications – Overall, the results demonstrate the importance of cash flow availability on SMEs’ working capital needs. Our findings suggest that in an event of cash flow unavailability (availability) managers should strive to reduce (increase) the investment in working capital in order to improve performance.

Originality/value – This current study incorporates the relevance of cash flow in assessing the association between WCM and firm performance.

Item Type: Article
Additional Information: CC BY-NC-ND: Creation Commons Attribution-NonCommercial-NoDerivatives License 4.0
Uncontrolled Keywords: Working capital management; performance; SMEs; cash flow
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HF Commerce > HF5001 Business
Divisions: Faculty of Social and Applied Sciences > The Business School
Depositing User: Dr Godfred Afrifa
Date Deposited: 18 Jan 2018 14:05
Last Modified: 04 Apr 2018 14:11

Actions (login required)

Update Item (CReaTE staff only) Update Item (CReaTE staff only)


Downloads per month over past year

View more statistics


Connect with us

Last edited: 29/06/2016 12:23:00