Abstract
This study provides evidence on the relationship between working capital management (WCM) and firms’ sustainability level covering 1,394 US publicly-listed firms in the period 2002-2020. We find that firms with higher ESG scores operate with lower working capital requirements and a shorter cash conversion cycle, although the effect comes entirely from the environmental and social pillars. The inconclusive result for the governance pillar reinforces the role of sustainability on WCM. Outperforming firms in sustainability scores have a lesser need for cash than the industry average. Overall, our findings highlight that WCM optimization may be attained following investment in firms’ sustainability.
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