Determining the nexus between Dynamic Working Capital Management and Operational Efficiency in Emerging Southeast Asia

Abstract

Objective— The primary aim of this study is to investigate the effect of dynamic working capital (DWC) management on operational efficiency through operating expenses and operating margins across non-financial firms in emerging markets. Methodology/Technique – This study utilized generalized method of moments (GMM) to evaluate a comprehensive dataset of 438 firms from Indonesia, Malaysia and Thailand for the period 2018 to 2023. Findings – DWC is measured study using both cash conversion cycle (CCC) and working capital ratio (WCR). Results show that optimized DWC management reduces operating expenses (OER) and increases operating margins (OMR). These findings highlight the importance of efficient working capital practices and liquidity management in emerging markets. Novelty – This study provides valuable insights for financial managers in emerging countries, advocating focused strategies on working capital cycles to strengthen operational efficiency and profitability. Type of Paper: Empirical JEL Classification: M13, M40, M49. Keywords: Working capital management, Cash conversion cycle, working capital requirement, Operating efficiency, Emerging countries Reference to this paper should be made as follows: Bashir, R; Ahmad, M; Sherif, S.R. (2024). Determining the nexus between Dynamic Working Capital Management and Operational Efficiency in Emerging Southeast Asia, J. Fin. Bank. Review, 9(2), 49 – 60. https://doi.org/10.35609/jfbr.2024.9.2(1)