The Effect of Working Capital Management on the Performance of Malaysian Public Listed Companies

Working capital management plays a crucial role in today’s organizations for maintaining efficiency. Despite the significance of this topic, empirical evidence of the relationship between working capital and performance in Malaysia during and after the COVID-19 pandemic is still scarce. This study aims to investigate the effect of working capital management on the company's performance of Malaysian listed firms. Average collection period, inventory turnover, average payment period, and cash conversion cycle are adopted as proxies for working capital management, and profitability is measured by return on assets (ROA). Panel data on 78 firms from the consumer non-cyclical sector, listed on Bursa Malaysia between 2021 and 2023, are employed. The results indicate that the average level of WCM represented by CCC is 105 days. This implies that companies need more than three months to transform their working capital into cash inflows. The panel data analysis demonstrates that CCC is significantly and negatively related to firm performance, which implies firms with shorter CCC have better financial performance. The results provide new empirical evidence and strategic insight into the firm’s performance in relation to working capital management.