Effects of the COVID-19 Global Crisis on the Working Capital Management Policy: Evidence from Poland

Hossein Tarighi,Grzegorz Zimon

doi:10.3390/jrfm14040169

Abstract

The paper aims to investigate the effects of the COVID-19 pandemic on working capital management policies among Polish small and medium-sized enterprises operating in Group Purchasing Organizations (GPOs). The results show that the firms adopted a moderate–conservative strategy for their working capital management. Moreover, the evidence confirms that the COVID-19 pandemic crisis did not change Working Capital Management (WCM) strategies significantly. The companies that have high financial security as a result of the high ratio of Liquidity, Quick, and cash conversion cycle (CCC) have tried to attract more new customers in the market by increasing the due date of accounts receivable so they can improve their sales performance, and also reduce the liabilities turnover to be able to work with more suppliers in the market. Moreover, among the various WCM strategies, the companies with a higher CCC ratio, along with those whose bulk of current assets consisted of accounts receivable and short-term investments, managed to have higher sales returns. Finally, our outcomes indicate that the firms operating in large cities have lower sales returns, meaning even Polish small and medium-sized enterprises’ ability within GPOs with the aid of the central unit can also get high return on sales (ROS) results.

Highlights

In early 2020, a new and infectious sickness called COVID-19 started in Wuhan China, and with its widespread prevalence all over the world, most countries have suffered from its economic destructive effects (Song et al 2021)
For better understanding and accurate comparison between data values in the period before COVID-19 and during the COVID-19 pandemic, comparative descriptive statistics are shown in Table 1 as follows: What stands out from table one is regardless of the COVID-19 pandemic crisis, small and medium-sized companies in Group Purchasing Organizations (GPOs), which play a major role in the economic growth of the Polish market, may generally adopted the moderate–conservative policy from 2015 to 2020 regarding their working capital management
To analyze the influence of the independent variable which COVID-19 crunches, we construct a dummy variable. To put it another way, if it is during the COVID-19 pandemic, this indicator variable equals one; and if the time is related to the time before the Coronavirus crisis, it equals zero

Summary

Introduction

In early 2020, a new and infectious sickness called COVID-19 started in Wuhan China, and with its widespread prevalence all over the world, most countries have suffered from its economic destructive effects (Song et al 2021). The importance of the financial effects of the COVID-19 pandemic currently has attracted the attention of many financial and economic researchers around the world. The point to consider is that in times of financial crisis, one of the appropriate solutions to get rid of financial problems is to make appropriate decisions regarding working capital management policies (Salehi et al.2019). In today’s complex and changing economic world, the decisions on working capital management strategies are some of the most important and challenging tasks for corporate executives since they can play a decisive role in improving the financial situation of companies in times of crisis (Salehi et al 2019), especially during the COVID-19 critical period. Particular attention should be paid to working capital management, as even the smallest mistakes in the area of working capital can lead to a loss of liquidity by companies (Chang et al 2019)

Objectives

Results

Discussion

Conclusion