Vol. 17 No. 36 (2022)

Artículos

Working capital management in the COVID-19 economic crisis: the case of non-financial enterprises listed in the IPC

Published 2022-06-02

  • Moisés Alejandro Alarcón Osuna
    • ,
  • Joab Jonathan Ibarra Castellanos

Moisés Alejandro Alarcón Osuna


Joab Jonathan Ibarra Castellanos


Abstract

The purpose of this study is to analyze the working capital management (WCM) strategies followed by non-financial firms listed in the IPC during the Covid-19 economic crisis, by estimating the target level of working capital requirements. We classify firms by operations in different geographies. Then we employ a regression analysis of random effects to estimate the working capital requirements (WCR) of the different firms, by regions, to understand the strategies of WCM. The study was conducted for the period 2018q1-2020q2, for which we have data available but also comparison for normal times (2018q1- 2019q4) vs Covid-19 times (2020q1-2020q2). The contribution is to describe the WCM practices in Mexico, because of the lack of studies of this kind, but also to analyze these practices in periods of economic crisis, where the working capital use to be high. The conclusion is that the WCR are related to the gross margins, but also that firms that have operations in locations different than Mexico have a better WCM.

Keywords

working capital management, economic crisis, Covid-19, shortterm strategies, non-financial firms

PDF

References

  1. Ballos, D.; N. Daskalakis, N. Eriotis1 & D. Vasiliou (2016). “SMEs capital structure determinants during severe economic crisis: the case of Greece”. COGENT Economics & Finance, vol., 4, pp. 1-11. DOI 10.1080/23322039.2016.1145535.
  2. Baños Caballero, S.; P. J. García-Teruel & P. Martínez-Solano (2013). “The speed of adjustment in working capital requirement”. European Journal of Finance, vol., 19 (10), pp. 978-992.
  3. Brandenburg, Marcus (2016). “Supply chain efficiency value creation and the economic crisis – An empirical assessment of the European automotive industry 2002-2010”. Int. J. Production Economics, vol., 171, pp. 321-335. DOI 10.1016/j.ijpe.2015.07.039.
  4. Claessens, Stijn; Simeon Djankov & Lixin Colin Xu (2000). “Corporate Performance in the East Asian Financial Crisis”. The World Bank Research Observer, vol. 15(1), pp. 23-46.
  5. Danso, Albert & Samuel Adomako (2014). “The financing behaviour of firms and financial crisis”. Managerial Finance, vol., 40(12), pp. 1159-1174. DOI 10.1108/MF-04-2014-0098.
  6. Deesomsak, Rataporn; Krishna Paudyal & Gioia Pescetto (2004). “The Determinants of Capital Structure: Evidence from the Asia Pacific Region”. Journal of Multinational Financial Management, vol. 14(4-5), pp. 387-405. DOI 10.1016/j.mulfin.2004.03.001.
  7. Deloof, Marc (2003). “Does Working Capital Management Affect Profitability of Belgian Firms?”. Journal of Business Finance & Accounting, vol., 30(3), pp. 573-587.
  8. Demirguc, Asli; Maria Martinez & Thierry Tressel (2015). “The Impact of the Global Financial Crisis on Firms’ Capital Structure”. Policy Research Working Paper, pp. 7522.
  9. Garcia, Pedro & Pedro Martinez (2007). “Effects of working capital management on SME profitability”. International Journal of Managerial Finance, vol., 3(2), pp. 164-177. DOI 10.1108/17439130710738718.
  10. Görkey, Iffet & Suleyman Gokhan (2011). “The impact of the global economic crisis on working capital of real sector in Turkey”. BEH - Business and Economic Horizons, vol., 4(1), pp. 52-69.
  11. Haron, Razali & Naji Mansour (2016). “Determinants Of Working Capital Management Before, During, And After The Global Financial Crisis Of 2008: Evidence From Malaysia”. The Journal of Developing Areas, vol., 50(5), pp. 461-468.
  12. Kieschnick, R.; M. Laplante & R. Moussawi (2013). “Working capital management and shareholders’ wealth”. Review of Finance, vol., 17 (5), pp. 1827-1852.
  13. Lim, Elizabeth; Shobha Das & Amit Das (2009). “Diversification Strategy, Capital Structure, and the Asian Financial Crisis (1997-1998): Evidence from Singapore Firms”. Strategic Management Journal, vol., 30, pp. 577-594. DOI 10.1002/smj.752.
  14. Morales, Jose; Catalina Díaz & Karla López (2011). “El capital de trabajo de las empresas de la industria de la transformación de la Bolsa Mexicana de Valores ante la crisis 2008-2010”. Economía Informa. 366, pp. 5-16.
  15. Morri, Giacomo & Andrea Artegiani (2015). “The effects of the global financial crisis on the capital structure of EPRA/NAREIT Europe index companies”. Journal of European Real Estate, vol., 8(1), pp. 3-23. DOI 10.1108/JERER-04-2014-0017.
  16. Nobanee, H (2018). “Efficiency of Working Capital Management and Profitability of UAE Construction Companies: Size and Crisis Effects”. Polish Journal of Management Studies, vol., 18(2), pp. 209-2015.
  17. Oseifuah, Emmanuel (2018). “Global Financial Crisis, Working Capital Management and Profitability of Non-Financial Firms Listed on The Johannesburg Stock Exchange, South Africa”. Academy of Entrepreneurship Journal, vol., 24(3), pp. 1-12.
  18. Pratap, Harsh & Satish Kumar (2014). “Working capital management: a literature review and research agenda”. Qualitative Research in Financial Markets, vol., 6(2), pp. 173-197. DOI 10.1108/QRFM-04-2013-0010.
  19. Ramiah, Vikash (2014). “Working capital management during the global financial crisis: the Australian experience”. Qualitative Research in Financial Markets, vol., 6(3), pp. 332-351. DOI 10.1108/QRFM-09-2012-0026.
  20. Ranajee & Rajesh Pathak (2019). “Corporate cash holding during crisis and beyond: what matters the most”. International Journal of Managerial Finance, vol., 15(4), pp. 492-510. DOI 10.1108/IJMF-03-2018-0085.
  21. Raźniak, Piotr & Anna Winiarczyk (2015). “Did the 2008 global economic crisis affect large firms in europe?”. Acta Geographica Slovenica, vol., 55(1), pp. 127-139. DOI 10.3986/AGS.740.
  22. Scholleeova, Hana (2012). “The Economic Crisis and Working Capital Management of Companies”. Theoretical and Applied Economics, vol., XIX(4), pp. 79-92.
  23. Suto, Megumi (2003). “Capital Structure and Investment Behaviour of Malaysian Firms in the 1990s: a study of corporate governance before the crisis”. Corporate Governance, vol., 11(1), pp. 25-39.
  24. Tsuruta, Daisuke (2019). “Working capital management during the global financial crisis: Evidence from Japan”. Japan & The World Economy, vol., 49, pp. 206-219. DOI 10.1016/j.japwor.2019.01.002.
  25. Yan Loo, Pui & Wei Theng Laua (2019). “Key components of working capital management: Investment performance in Malaysia”. Management Science Letters, vol., 9, pp. 1955-1964. DOI 10.5267/j.msl.2019.7.010.

Most read articles by the same author(s)