Does Firm Size Moderate the Relationship Between Working Capital Level and Firm Profitability?
This study is aimed at investigating whether firm size moderates the relationship between working capital level and profitability of manufacturing firms in Uganda. The study was based on theResource – Based Theory and it is to do with resources invested in the firm and much emphasis is put on the short-term assets. The study used secondary data and applied simple and stratified sampling techniques. The unbalanced pooled panel data analysis of cross sectional and time series was employed. A record survey sheet was used to collect data and there after diagnostic tests was carried out for normality and data was fairly normally distributed and also showed a linear relationship which is a condition for parametric data. A total population of 169 manufacturing firms was considered and a sample of 116 was taken into consideration giving a response rate of 27% as only 31 firms were able to avail information. Results showed R2 = .155, F (3, 85) = 5.185, P< .05. The interaction termwas not significant thus (β = .001, P > .05). Findings revealed that the moderating influence of firm size on the association between working capital level and firm profitability was not statistically significant and consequently the null hypothesis was not rejected. It can be concluded that size does not moderate the relationship between working capital level and firm profitability.
Akoto, R. K., Awunyo, V. D., &Angmor, P. L. (2013). Working capital management and profitability. Journal of Economics and International Finance, 5(9), 373-379.
Almazari, A. A. (2013). The relationship between working capital management and profitability: Evidence from Saudi cement companies. British Journal of Economics, Management & Trade, 4 (1), 146-157.
Andy, F. (2009). Discovering Statistics using SPSS, (3rd ed.), Sage Publications Ltd, London.
Ayyagari, M., Asili, D., & Vojislav, M. (2005). How well do institutional theories explain firm’s perceptions of property rights? Washington, DC: World Bank, development research group, finance team. Policy research working paper; 3709
Banos – Caballero, S., Garcia – Teruel, P. J., &Martizen - Solano, P. 2010, Working capital management in SMEs. Accounting and Finance Journal, 50 (3) 511 – 527
Baron, R. M., & Kenny, D. A. (1986). The moderator – mediator variable distinction in social psychological research: Conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, 51 (6), 1173 – 1182.
Bodie, Z., Kane, A., & Marcus, A. J. (2004). Essentials of investments. McGraw Hill, Irwin.
Chatterjee, S. (2010). Impact of working capital management on the profitability of the listed companies in the London Stock Exchange. http:// papers. ssrn. Com/s013/ papers. cfm abstract 19 1587429.
Field, A. (2009). Discovering statistics using SPSS, (3rded,), Sage Publications Ltd, London.
Goddard, J., Tavakoli, M., & Wilson, J. (2005). Determinants of profitability in European manufacturing and services; evidence from a dynamic panel model. Applied Financial Economics, 15 (18), 1269 – 1282.
Nunes, P. M., &Serrasquero, Z. S. (2008). Performance and size; Empirical Evidence from Portuguese SMEs Small Business Economics, 31 (2), 195 – 217.
Nunnaly, J. C. (1978). Psychometric theory. New York: McGraw – Hill.
Salimath, J. (2008); Knight, G., &Tarma, P. (2004). Do competitive environment lead to the rise and spread of unethical behavior. Journal of Business Ethics, 83 (4): 703 – 723