Working capital management and profitability: Cash threshold effects in Vietnam’s transportation sector

Type of the article: Research Article AbstractThis study examines whether the relationship between working capital management and profitability in Vietnam’s listed transportation is nonlinear and influenced by a cash-holding threshold. Using panel data from 88 transportation firms listed on HSX, HNX, and UPCOM during the period 2014–2023, and Hansen’s (1999) threshold regression, the study identifies the threshold point and estimates the model parameters. The empirical results reveal that before reaching the identification threshold, DSO, DPO, and DSI have a noticeably negative impact on ROA (coefficients being –0.004, –0.006, and –0.017, p < 0.01), indicating that lengthening collection, payment, or inventory periods harms profitability under lower liquidity conditions. However, once the identified threshold is exceeded, the effects of DSO, DPO, CCC, and OCC are reversed, suggesting that with sufficient liquidity, more lenient working capital policies can actually support profitability. Meanwhile, control variables such as LEV and CASH demonstrate a substantially positive influence on ROA (LEV: 0.016–0.022; CASH: 0.0904–0.1512, p < 0.01), affirming that prudent debt use and ample liquidity buffers enhance performance, whereas SZ negatively affects ROA (–0.0176 to –0.0219, p < 0.01). The study proposes some practical recommendations for working capital management to enhance the profitability of transportation firms.