TY - JOUR
T1 - Unveiling WCM and firm performance relationship
T2 - evidence from Shariah compliance United Kingdom firms
AU - Kayani, Umar
AU - Hasan, Fakhrul
AU - Choudhury, Tonmoy
AU - Nawaz, Farrukh
PY - 2025/1/6
Y1 - 2025/1/6
N2 - Purpose: The purpose of this study is to investigate the realtionship between the strategic maneuvers in working capital management (WCM) and the ensuing corporate performance, chiefly within the purview of companies aligned with Shariah-compliant financial practices during epochs of fiscal distress. Design/methodology/approach: This study deploys a fixed effect regression model to dissect the WCM-performance nexus for Shariah and non-Shariah compliance firms in the UK. Here, the authors used FTSE 350 index data from 1990 till 2022. The authors used return on assets, return on equity and net profit margin as the dependent variables and they used working capital as the independent variable. Finally, a set of different control variables including, size, leverage, dividend and research and development. Furthermore, for robust purposes, the authors use the system generalized method of moments estimation. Findings: The findings reveal a significant relationship between WCM and firm performance across different crisis periods. Effective WCM is associated with improved profitability and stability in firms. This study shows that firms with efficient WCM strategies were better positioned to navigate the financial turmoil of the GFC, the operational disruptions during COVID-19 and the economic impacts of the Russia–Ukraine conflict. Originality/value: This research provides a significant perspective by spotlighting Sharia-compliant entities, thus charting new territory in the strategic finance discourse. In addition, the focus on Shariah-compliant firms introduces a novel perspective within the financial management domain, offering valuable insights for both academic researchers and financial practitioners.
AB - Purpose: The purpose of this study is to investigate the realtionship between the strategic maneuvers in working capital management (WCM) and the ensuing corporate performance, chiefly within the purview of companies aligned with Shariah-compliant financial practices during epochs of fiscal distress. Design/methodology/approach: This study deploys a fixed effect regression model to dissect the WCM-performance nexus for Shariah and non-Shariah compliance firms in the UK. Here, the authors used FTSE 350 index data from 1990 till 2022. The authors used return on assets, return on equity and net profit margin as the dependent variables and they used working capital as the independent variable. Finally, a set of different control variables including, size, leverage, dividend and research and development. Furthermore, for robust purposes, the authors use the system generalized method of moments estimation. Findings: The findings reveal a significant relationship between WCM and firm performance across different crisis periods. Effective WCM is associated with improved profitability and stability in firms. This study shows that firms with efficient WCM strategies were better positioned to navigate the financial turmoil of the GFC, the operational disruptions during COVID-19 and the economic impacts of the Russia–Ukraine conflict. Originality/value: This research provides a significant perspective by spotlighting Sharia-compliant entities, thus charting new territory in the strategic finance discourse. In addition, the focus on Shariah-compliant firms introduces a novel perspective within the financial management domain, offering valuable insights for both academic researchers and financial practitioners.
KW - Crisis
KW - Firm performance
KW - Shariah
KW - WCM
UR - http://www.scopus.com/inward/record.url?scp=85214002392&partnerID=8YFLogxK
U2 - 10.1108/IMEFM-04-2024-0168
DO - 10.1108/IMEFM-04-2024-0168
M3 - Article
AN - SCOPUS:85214002392
SN - 1753-8394
JO - International Journal of Islamic and Middle Eastern Finance and Management
JF - International Journal of Islamic and Middle Eastern Finance and Management
ER -