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Decision-Making on Working Capital Management, Based on Industry Differences

Haritini Tsangari

Haritini Tsangari 1

  1. Department of Economics and Finance, School of Business, University of Nicosia, Nicosia, Cyprus 1

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on PubMed

Pages: 99-110

DOI: 10.18488/journal.62.2019.62.99.110

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Article History:

Received: 15 November, 2018
Revised: 31 December, 2018
Accepted: 05 February, 2019
Published: 09 April, 2019


The effect of working capital components on profitability has conflicting empirical evidence, which is mostly data-driven. This paper aims to provide additional insight to this end, especially focusing on the neglected aspect of industry differentiation. The analysis implements a panel regression methodology on a dataset of 300 observations from firms in Cyprus, adjusting for control variables and considering industry differences. Overall, the present study illustrates that industry differences warrant in-depth examination for decision-making regarding working capital management policies. The findings show that the cash conversion cycle and its components have an effect on profitability, but the sign and level of significance vary according to the industry sector: results in the merged sample differ from the results by industry sector. For example, the cash conversion cycle has a positive effect on the consumer goods sector and a negative effect in the industrials sector. Additionally, management of creditors and suppliers is as important as the management of debtors, especially for consumer goods and industrials. Managers should aim for the optimal level of the working capital components, while simultaneously adjusting their strategies based on their industry sector, to boost firm profitability.
Contribution/ Originality
This study contributes to the existing literature regarding the effect of working capital management on profitability. The paper’s primary contribution is finding that the sign and level of the effect of the cash conversion cycle and its components on profitability vary according to the industry sector, which can thus adjust decision-making.


Working capital management, Gross operating profit, Cash conversion cycle, Industry differentiation, Consumer goods sector, Industrials sector, Consumer services.




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This study received no specific financial support.

Competing Interests:

The author declares that there are no conflicts of interests regarding the publication of this paper.


The author would like to thank Ms. Irene Charalambous for her assistance with data collection.

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