Impact of Working Capital Management on Profitability and Market value of the Logistics Industry

Abstract

A company needs sufficient non-current assets and current assets for the successful running of the business and maximization of the wealth of the firm. Especially, in the short-run current assets or working capital management plays an important role in the success or failure of the firm and its impact on its profitability of the firm. This article aims to examine the impact of working capital management on the performance and as well as the market value of companies in the logistics industry. This study used the fixed effect panel data analysis with a data set covering six logistics companies listed on the Bombay Stock Exchange, India for the period 2013-2022. To estimate the relationship between working capital management and the performance of companies used Return on Assets (ROA), Return on Equity (ROE), and Market value to Book value (MVBV) as dependent variables in the research models. The main results indicate that the positive relationship between working capital, market value, and profitability is not very clear. Logistics companies’ sales are negatively associated with MVBV and ROE of logistics companies. The cash conversion cycle is found statistically not significant, and the relationship between CCC and profitability is negative. Overall, of the study, it is concluded that working capital has an impact on the profitability of logistics companies in India.