Impact of Working Capital Management Policies on Financial Performance of Textile Sector: Evidence from Pakistan Stock Exchange

Abstract

The study aims at  empirically explore the impact of working capital management (WCM) policies on firms performance of most notable and influential sector of textile firms listed in Pakistan stock exchange (PSX). Non-financial sector contributes 13.5% in GDP of Pakistan while textile sector is a major part of this contribution in terms of socio-economic growth in the country.  A balanced panel data of 74 Textile sample firms listed on PSX covering the period of 2011-2016 is used for analysis through fixed effect panel data regression approach. The empirical results indicate that adopting a conservative investment policy & aggressive financing policy has a positive impact on firms performance and inventory turnover in days( ITID), average collection period (ACP), SIZE & financial leverage (FL) have negative and significant impact on firms performance whereas, cash conversion cycle (CCC) has positive and significant impact on performance. Finally, average payment period (APP) has negative but insignificant impact on firm’s performance. By validating the findings with previous researches, this endeavor may contribute to the existing literature and may be beneficial to the academicians, investors; managers and policy makers while the study present recommendations that in turn bring improvements in the performance of sample firms.