The Cross-Industry Study of Working Capital Management Efficiency

The study is devoted to the problem of working capital management and aims to establish its relationship between the company’s profitability on a cross-industry level. Cash conversion cycle (CCC) and return on assets (ROA) are chosen as the company’s working capital and efficiency measurements. The sample consists of 233 oil and gas and 1979 telecommunication companies with observations for 2013-2017. The following aspects are studied - how does a relationship between profitability and WC differ across selected industries in Russia and what are the main influencing factors of WC in each industry. What is more, due to the fact that almost no research has been done on the topic of Russian crisis of 2014-2015, this study analyzes the effect of the crisis on working capital management. The results indicate that, in order to increase profitability, telecommunication companies should increase days payables outstanding and decrease days sales and inventory outstanding, which results in the negative cash conversion cycle. The cash conversion cycle is not significant for oil and gas companies, however, the only CCC component which is significant is days inventory outstanding. It has a direct relationship with ROA, which implies that in order to increase profitability it is important for oil and gas to increase inventory. The effect of the crisis is only valid for oil and gas companies – the components of the cash conversion cycle began to matter in the period of the economic decline of 2014-2015.