The Impacts of Working Capital Management on Profitability: A Study on Portuguese Small and Medium-sized Enterprises in High Technology and Medium-high Technology Manufacturing Sectors

With using panel data methods (fixed effects model and pooled regression model), this paper mainly analyzes the impacts of the period of receivables, the period of inventory, the period of payables, and cash conversion cycle (as the factors of working capital management) on the profitability of Portuguese small and medium-sized enterprises (SMEs) in high technology and medium-high technology manufacturing sectors. Besides, the influence of some important firm-related factors, industry-related factor (industry dummy), and macro-economic factor (GDP growth) is also taken into consideration. In particular, the total sample is classified into micro and non-micro SME groups as well as young and mature groups, in order to compare the differences. The research results show that: (1) the negative effects of the period of receivables, the period of inventory, the period of payables, and cash conversion cycle are stressed, but not for the non-micro and the mature firms (where positive relationships too exist for the period of inventory, the period of payables, and cash conversion cycle); so here aggressive working capital management strategy and shorter cash conversion cycle are partially supported; (2) the positive effects of total assets and GDP growth as well as the negative effects of indebtedness and age are highlighted.