Working capital management and firm sales growth: evidence from fish processing industry

Abstract

Working capital management (WCM) is a critical matter forthe growth of firms, especially small and medium‐sizedmanufacturing companies faced with liquidity shortageswhose current assets account for a significant part of theirinvestments. These characteristics describe most compa-nies in the fish processing industry. Using a sample of morethan 1050 European fish processing companies duringthe period 2013–2020 and applying dynamic panel datamethods, this paper analyses the extent to which workingcapital investment and financing policies affect firm's salesgrowth. The empirical evidence reveals that the trade creditchannel (i.e., accounts receivable and accounts payable)enhances sales growth, while the opposite effect is foundfor investment in inventories. Additionally, the findingsinsist on the importance of financing current assets withpositive working capital to boost sales growth. [EconLitCitations: C23, G31, L25, L79, Q22]