Working capital management and firm sales growth: Evidence from fish processing industry

Abstract

AbstractWorking capital management (WCM) is a critical matter for the growth of firms, especially small and medium‐sized manufacturing companies faced with liquidity shortages whose current assets account for a significant part of their investments. These characteristics describe most companies in the fish processing industry. Using a sample of more than 1050 European fish processing companies during the period 2013–2020 and applying dynamic panel data methods, this paper analyses the extent to which working capital investment and financing policies affect firm's sales growth. The empirical evidence reveals that the trade credit channel (i.e., accounts receivable and accounts payable) enhances sales growth, while the opposite effect is found for investment in inventories. Additionally, the findings insist on the importance of financing current assets with positive working capital to boost sales growth. [EconLit Citations: C23, G31, L25, L79, Q22].