The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan

The main objective of this research is to determine the impact of working capital management (WCM) on the growth of manufacturing firms in Pakistan. This study mainly targets four separate analyses for measuring the impact of static WCM and dynamic WCM on firms' internal and sustainable growth...

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Main Author:	Bilal Ahmed, Chishty
Format:	Thesis
Language:	English English
Published:	2021
Subjects:	HG Finance
Online Access:	http://ir.unimas.my/id/eprint/35811/2/Bilal%20Ahmed%20Chishty%20-%2024%20pgs.pdf http://ir.unimas.my/id/eprint/35811/5/Bilal%20Ahmed%20Chishty.pdf
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spelling	my-unimas-ir.358112024-02-19T06:38:02Z The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan 2021-08-14 Bilal Ahmed, Chishty HG Finance The main objective of this research is to determine the impact of working capital management (WCM) on the growth of manufacturing firms in Pakistan. This study mainly targets four separate analyses for measuring the impact of static WCM and dynamic WCM on firms' internal and sustainable growth of the manufacturing firms in Pakistan. A total of 174 companies were selected as study sample over a period of 2007 to 2016. The study employed Static panel regression over a balanced panel data namely, pooled ordinary least square (POLS), Random Effect Model (REM), Fixed Effect Model (FEM) using Hausman test specification. Additionally, a series of diagnostic tests was also performed namely, multicollinearity, heteroscedasticity, and serial correlation test. The findings of the study revealed that static WCM measures (Current Ratio) have a significant negative impact on firms' internal growth. Dynamic WCM measures namely, days sales outstanding DSO and inventory turnover ITO has a significant negative impact on firms' internal growth rate, leverage and current assets investments have also impacted significantly on firms' internal growth. For sustainable growth models, the findings of this study revealed that static WCM does not have any significant impact on the firm's sustainable growth. Moreover, inventory turnover (ITO), and payable deferral period (PDP) which are dynamic WCM measures, show a significant impact on firms' sustainable growth rate. The overall results confirmed that dynamic WCM measures ITO, and PDP predicted firms' internal and sustainable growth rate significantly. This suggests that the Firms will have more internal growth with low liquidity by maintaining the investment in ITO and DSO. Similarly, findings suggest that high investment in ITO and less use of supplier's credit (PDP) may lead to positive results in the sustainable growth of firms. The study further confirmed that size, leverage, dividend payout ratio, and current assets investment policy are critical tools that minimize the risk of achieving a high level of the internal and sustainable growth rate of firms in Pakistan. Based on study findings, it is suggested that business leaders may incorporate optimum use of working capital management practices into overall corporate business policy, thereby aligning working capital requirements with the changing business requirements that support firms' growth internally and sustainably. Moreover, results in the research would be utilized in the efficient identification and exploration of working capital management practices among listed manufacturing sectors of Pakistan in the future. Universiti Malaysia Sarawak (UNIMAS) 2021-08 Thesis http://ir.unimas.my/id/eprint/35811/ http://ir.unimas.my/id/eprint/35811/2/Bilal%20Ahmed%20Chishty%20-%2024%20pgs.pdf text en public http://ir.unimas.my/id/eprint/35811/5/Bilal%20Ahmed%20Chishty.pdf text en validuser phd doctoral Universiti Malaysia Sarawak (UNIMAS) Faculty of Economics and Business
institution	Universiti Malaysia Sarawak
collection	UNIMAS Institutional Repository
language	English English
topic	HG Finance
spellingShingle	HG Finance Bilal Ahmed, Chishty The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan
description	The main objective of this research is to determine the impact of working capital management (WCM) on the growth of manufacturing firms in Pakistan. This study mainly targets four separate analyses for measuring the impact of static WCM and dynamic WCM on firms' internal and sustainable growth of the manufacturing firms in Pakistan. A total of 174 companies were selected as study sample over a period of 2007 to 2016. The study employed Static panel regression over a balanced panel data namely, pooled ordinary least square (POLS), Random Effect Model (REM), Fixed Effect Model (FEM) using Hausman test specification. Additionally, a series of diagnostic tests was also performed namely, multicollinearity, heteroscedasticity, and serial correlation test. The findings of the study revealed that static WCM measures (Current Ratio) have a significant negative impact on firms' internal growth. Dynamic WCM measures namely, days sales outstanding DSO and inventory turnover ITO has a significant negative impact on firms' internal growth rate, leverage and current assets investments have also impacted significantly on firms' internal growth. For sustainable growth models, the findings of this study revealed that static WCM does not have any significant impact on the firm's sustainable growth. Moreover, inventory turnover (ITO), and payable deferral period (PDP) which are dynamic WCM measures, show a significant impact on firms' sustainable growth rate. The overall results confirmed that dynamic WCM measures ITO, and PDP predicted firms' internal and sustainable growth rate significantly. This suggests that the Firms will have more internal growth with low liquidity by maintaining the investment in ITO and DSO. Similarly, findings suggest that high investment in ITO and less use of supplier's credit (PDP) may lead to positive results in the sustainable growth of firms. The study further confirmed that size, leverage, dividend payout ratio, and current assets investment policy are critical tools that minimize the risk of achieving a high level of the internal and sustainable growth rate of firms in Pakistan. Based on study findings, it is suggested that business leaders may incorporate optimum use of working capital management practices into overall corporate business policy, thereby aligning working capital requirements with the changing business requirements that support firms' growth internally and sustainably. Moreover, results in the research would be utilized in the efficient identification and exploration of working capital management practices among listed manufacturing sectors of Pakistan in the future.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Bilal Ahmed, Chishty
author_facet	Bilal Ahmed, Chishty
author_sort	Bilal Ahmed, Chishty
title	The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan
title_short	The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan
title_full	The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan
title_fullStr	The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan
title_full_unstemmed	The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan
title_sort	impact of static and dynamic working capital on growth of manufacturing firms in pakistan
granting_institution	Universiti Malaysia Sarawak (UNIMAS)
granting_department	Faculty of Economics and Business
publishDate	2021
url	http://ir.unimas.my/id/eprint/35811/2/Bilal%20Ahmed%20Chishty%20-%2024%20pgs.pdf http://ir.unimas.my/id/eprint/35811/5/Bilal%20Ahmed%20Chishty.pdf
_version_	1794023025931190272

The Impact of Static and Dynamic Working Capital on Growth of Manufacturing Firms in Pakistan

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