What is it about?
This study explores the relative efficiency of working capital management (WCM) for Emirati firms before and during the coronavirus crisis. Next, this study explores the potential impact of WCM on the likelihood of financial distress. Data envelopment analysis (DEA) was applied to assess the relative efficiency of WCM. This study uses the emerging market Z-score model to predict the likelihood of financial distress. Logistic regression is applied to investigate the impact of WCM efficiency on firms’ financial distress. The results of this study’s model show a negative and significant influence of WCM efficiency on firms’ likelihood of financial distress. These findings have important implications for many stakeholders, including decision makers, WC managers, financiers, investors, financial consultants, and researchers, in increasing their awareness of firms’ WCM performance before and during the crisis. Furthermore, the results could have implications for trading strategies, as investors seek attractive economic gains from their investments in firms that care about WCM. The implications of WCM performance on social interests would cause firms’ decision makers to operate efficiently and achieve the best practices to minimise the probability of firms’ financial distress. This study makes a novel contribution to the literature by introducing a model to assess WCM based on DEA technology.
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Why is it important?
This study has important implications for many stakeholders, including decision makers, WC managers, financiers, investors, financial consultants, and researchers, in increasing their awareness of firms’ WCM performance before and during the crisis. Furthermore, the results could have implications for trading strategies, as investors seek attractive economic gains from their investments in firms that care about WCM. The implications of WCM performance on social interests would cause firms’ decision makers to operate efficiently and achieve the best practices to minimise the probability of firms’ financial distress. This study makes a novel contribution to the literature by introducing a model to assess WCM based on DEA technology.
Perspectives
The implications of WCM performance on social interests would cause firms’ decision makers to operate efficiently and achieve the best practices to minimise the probability of firms' financial distress.
Dr. Ahmed Mohamed Habib
Independent Research Unabhangige Finanzmarktanalyse GmbH
Read the Original
This page is a summary of: Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE, Corporate Governance, June 2022, Emerald,
DOI: 10.1108/cg-12-2021-0440.
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Resources
Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE
This study explores the relative efficiency of working capital management (WCM) for Emirati firms before and during the coronavirus crisis. Next, this study explores the potential impact of WCM on the likelihood of financial distress. Data envelopment analysis (DEA) was applied to assess the relative efficiency of WCM. This study uses the emerging market Z-score model to predict the likelihood of financial distress. Logistic regression is applied to investigate the impact of WCM efficiency on firms’ financial distress. The results of this study’s model show a negative and significant influence of WCM efficiency on firms’ likelihood of financial distress. These findings have important implications for many stakeholders, including decision makers, WC managers, financiers, investors, financial consultants, and researchers, in increasing their awareness of firms’ WCM performance before and during the crisis. Furthermore, the results could have implications for trading strategies, as investors seek attractive economic gains from their investments in firms that care about WCM. The implications of WCM performance on social interests would cause firms’ decision makers to operate efficiently and achieve the best practices to minimise the probability of firms’ financial distress. This study makes a novel contribution to the literature by introducing a model to assess WCM based on DEA technology.
Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE
This study explores the relative efficiency of working capital management (WCM) for Emirati firms before and during the coronavirus crisis. Next, this study explores the potential impact of WCM on the likelihood of financial distress. Data envelopment analysis (DEA) was applied to assess the relative efficiency of WCM. This study uses the emerging market Z-score model to predict the likelihood of financial distress. Logistic regression is applied to investigate the impact of WCM efficiency on firms’ financial distress. The results of this study’s model show a negative and significant influence of WCM efficiency on firms’ likelihood of financial distress. These findings have important implications for many stakeholders, including decision makers, WC managers, financiers, investors, financial consultants, and researchers, in increasing their awareness of firms’ WCM performance before and during the crisis. Furthermore, the results could have implications for trading strategies, as investors seek attractive economic gains from their investments in firms that care about WCM. The implications of WCM performance on social interests would cause firms’ decision makers to operate efficiently and achieve the best practices to minimise the probability of firms’ financial distress. This study makes a novel contribution to the literature by introducing a model to assess WCM based on DEA technology.
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