Working Capital Efficiency and Financial Performance: A Panel Data Analysis of BSE Dollex 200 Companies

Working Capital Efficiency and Financial Performance: A Panel Data Analysis of BSE Dollex 200 Companies

Ruchika1 and Amit Kumar2

1Research Scholar, School of Commerce and Management, Om Sterling Global University, Hisar, Haryana (India). E-Mail: ruchika1991jindal@gmail.com

2Professor, School of Commerce and Management, Om Sterling Global University, Hisar, Haryana (India). E-Mail: hodscm@osgu.ac.in

ABSTRACT

This study examines the impact of working capital efficiency on financial performance among firms listed on the BSE Dollex 200 index, focusing on the relationship between the cash conversion cycle (CCC) and profitability metrics such as Return on Assets (ROA) and Return on Equity (ROE). Using panel data from 2015 to 2023, the research investigates the effects of CCC components—Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), and Days Payables Outstanding (DPO)—on corporate profitability. Employing fixed and random effects regression models, the analysis reveals a significant negative relationship between CCC and profitability, underscoring the importance of efficient working capital management in enhancing financial performance. Sectoral variations are observed, with manufacturing firms displaying shorter CCCs compared to retail companies, highlighting the need for tailored WCM strategies. The findings contribute to the literature on working capital management in emerging markets and provide actionable insights for Indian firms aiming to optimize liquidity and profitability. This study also identifies areas for future research, including the integration of macroeconomic factors and the exploration of WCM practices in SMEs. The results reinforce the strategic importance of efficient working capital practices in achieving sustainable financial growth.

Keywords: Working Capital Management (WCM), Cash Conversion Cycle (CCC), Profitability, Indian Corporate Sector, Financial Performance.