Working capital management of manufacturing companies in Bangladesh: What factors make significant impact?

Abstract

The paper aims to determine factors that make a significant impact on working capital management of a manufacturing company in Bangladesh. Of 221 service and manufacturing firms listed on the Dhaka Stock Exchange, 109 companies are chosen based on data availability for the five-year period 2014-2018. The study examines literature on working capital management and tests theory on manufacturing companies listed on the Dhaka Stock Exchange. Cash conversion cycle is used as a measurement of working capital efficiency. Financial ratios representing six aspects of company's financial performance are taken as explanatory variables. They represent company asset management, debt structure, growth, liquidity, profitability, and size. The paper runs multivariate regression and correlation on the 545 firm-year observations in the panel data. Multicollinearity among the final statistically significant explanatory variables has also been tested. It is observed that company growth, profitability, and leverage can significantly explain company working capital efficiency in the manufacturing industry of Bangladesh.