The impact of working capital management on the financial performance of listed enterprises: an empirical evidence from Vietnam

This study aims to assess the impact of working capital management on the financial performance of listed enterprises. Based on 441 enterprises listed on Vietnam’s Stock Exchange during from 2012 to 2022, and the regression methods such as Pooled ordinary least squares (OLS), fixed effect method (FEM), random effect method (REM), and feasible generalized least squares (FGLS) as well as the possibility of endogenous phenomena in the estimated model, the research results show that working capital has an impact on the corporate financial performance. Specifically, the components of working capital, such as the days sales outstanding (DSO), days inventory outstanding (DIO), cash conversion cycle (CCC), and operating cash cycle (OCC), have negative and statistically significant impacts on return on assets (ROA) and return on equity (ROE). Thus, improving working capital efficiency through DSO, DIO, CCC, and OCC makes the business more efficient. However, the study also finds that days payable outstanding (DPO) has a negative impact on financial performance, indicating that delays in payment to suppliers tend to reduce business profitability. The endogeneity problem is controlled, CCC and OCC lose their relationships with both ROA and ROE. Furthermore, there exists an inverted U-shaped relationship between working capital management and financial performance.