Management of working capital - the Achilles heel of small and medium enterprises (SMEs). The case of Greece

• Authors: Alina Hyz , Petros Kalandonis , Dimitrios Stavroulakis
• Languages of publication: EN

Abstracts

EN

Working capital represents the amount of funds invested in firms' current assets. Optimizing working capital management is a challenge and a necessity for firms especially today due to the demand volatility and limit access to bank credit. This paper investigates the relationship between working capital management and firms' performance in small and medium enterprises in Greece. The results suggests that an effective working capital management is a necessary component of firm's future growth and profitability. The analysis used data for a sample of 459 small and medium enterprises for the period from 2008 to 2012. The paper is organized as follows: in the next section we briefly present the problem based on literature review. This is followed by the presentation of research methodology and the data sources used in the analysis. The results are presented and discussed in section three. Last section summarizes the conclusions and presents further opportunities for research. (original abstract)

Keywords

EN

Small business; Working capital; Enterprise profitability

PL

Małe i średnie przedsiębiorstwa; Kapitał obrotowy; Rentowność przedsiębiorstwa

• Publisher: Instytut Naukowo-Wydawniczy "SPATIUM"
• Journal: Central European Review of Economics & Finance
• Year: 2017
• Issue: Vol. 18, No 2
• Pages: 5-18

Contributors

author

Alina Hyz

• Piraeus University of Applied Sciences, Greece

author

Petros Kalandonis

• Piraeus University of Applied Sciences, Greece

author

Dimitrios Stavroulakis

• Piraeus University of Applied Sciences, Greece

References

• Acs Z.J., Audretsch D.B. (1990). The Economics of Small-Firms: A European Challenge, Kluwer Academic Publishers, Dordrecht.
• Acs Z.J., Audretsch D.B. (1993). Small Firms and Entrepreneurship: An East- West Perspective, Cambridge University Press, Cambridge.
• Baltagi B., Bresson G., Pirotte A. (2003). Fixed Effects, Random Effects or Hausman-Taylor? A pretest estimator, Economic Letters, Vol. 79.
• Berger A., Klapper F., Udell. G. (2001). The Ability of Banks to Lend to Informational Opaque Small Business, Journal of Banking and Finance, Vol. 25.
• Boute N.R., Lambrecht M.R., Lambrechts O., Sterckx P. (2007). An Analysis of inventory turnover in the Belgian manufacturing industry, wholesale and retail and the financial impact on inventory reduction, Department of Decision Sciences and Information Management (KBI), Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven.
• Brożek K., Kogut J. (2016). Econometric analysis of selected factors of innovative companies activity in the polish economy, Central European Review of Economics & Finance, No. 6, Vol. 16.
• Bukowski S.I., Hyz A.B. (2015). Integration of Greek and polish equity markets with the euro area equity market. Comparative analysis, Central European Review of Economics & Finance, No. 3, Vol. 9.
• Caballero J., Teruel G., Solano P. (2009). Working Capital Management in SMEs. Accounting and Finance, No. 3, Vol. 50.
• Cannon A.R. (2008). Inventory Improvement and Financial Performance, International Journal of Production Economics, Vol. 115.
• Capkun V., Hameri A.P., Weiss L.A. (2009). On the relationship between inventory and financial performance in manufacturing companies, International Journal of Operations & Production Management, Vol. 29, Iss. 8.
• Deloof M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms?, Journal of Business Finance & Accounting, No. 3-4, Vol. 30.
• Dunlop W. (1992). Small vs. Large Firms in Australian Manufacturing, Small Business Economics, No. 1, Vol 4.
• García-Teruel P.J., Martínez-Solano P. (2007). Effects of working capital management on SME profitability, International Journal of Managerial Finance, Iss. 2, Vol. 3.
• Gikas G., Hyz A., Tagkas P. (2013). The Experience of Greece from its participation in the Eurozone, Management Insight. The Journal of Incisive Analysers, No 1, Vol. IX.
• Gikas G., Hyz A., Tangkas P. (2012). Global Financial Crisis and Greek Debt Crisis, Acta Universitatis Lodzendzis, Folia Oiconomika 273.
• Gill A. (2011). Factors that Influenc Working Capital Requirement in Canada, Economics and Finance Review, Vol. 1(3): 30-40, May.
• Hyz A. (2006). The Development of Entrepreneurship and Small Business in Poland, Festschrift in honour of professor Maria Negreponti - Delivani, University of Macedonia, Economic and Social Sciences, Thessaloniki.
• Hyz A. (2011). Small and Medium Enterprises (SMEs) in Greece - barriers in access to Banking Services. Empirical Investigation, International Journal of Management and Technology (IJMT), Vol. 1.
• Jordan J., Lowe J., Taylo P. (1998). Strategy and Financial Policy in UK Small Firms, Journal of Business Finance and Accounting, Vol. 25.
• Kargar J., Blumenthal R.A. (1994). Leverage impact of working capital in small businesses, TMA Journal, No. 6, Vol. 14.
• Lazaridis I., Tryfonidis D. (2006). The relationship between working capital management and profitability of listed companies in the Athens Stock Exchange, Journal of Financial Management and Analysis, No. 1, Vol. 19.
• Mulhern A. (1995). The SME sector in Europe: a broad perspective, Journal of Small Business Management, No. 3, Vol. 33.
• Peterson M., Rajan R. (1997). Trade Credit: Theories and Evidence. Review of Financial Studies, No. 3, Vol. 10.
• Raheman A., Nasr M. (2007). Working Capital Management And Profitability - Case Of Pakistani Firms, International Review of Business Research Papers, No. 1, Vol. 3.
• Samiloglu F., Demigunes K. (2008). The Effect of Working Capital Managemnet on Firm Profitability: Evidence from Turkey, The International Journal of Applied Economics and Finance No. 2(1).
• Shah R., Shin H. (2007). Relationships Among Information Technology, Inventory, and Profitability: An Investigation of Level Invariance Using Sector Level Data, Journal of Operations Management, Vol. 25.
• Shin H.H., Soenen L. (1998). Efficiency of working capital and corporate profitability, Financial Practice and Education, No. 2, Vol. 8.
• Smith K. (1980). Profitability Versus Liquidity Tradeoffs In Working Capital Management, In Readings On The Management Of Working Capital. New York: St. Paul, West Publishing Company.
• Van-Horne J.C., Wachowicz, J.M. (2004), Fundamentals of financial management, Prentice Hall Publishers, 2004, 12th edition.
• Vijay Kumar A. (2001). Working Capital Management. A Comparative Study, Northern Book Centre, New Delhi.
• Voulgari F., Doumptos M., Zapounidis C. (2000). On the evolution of Greek industrial SME's performance via multicriteria analysis of financial ratios, Small Business Economics, Vol. 15.