Profile Deviation Analysis of Global Firms’ Working Capital Management in the Automotive Industry During the Financial Crisis and Recovery Periods

Abstract

In uncertain industrial environment with economic downturn, firms are faced with various risks such as financing and liquidity, supply chain disruption, and demand shock, etc., hence the need for effective working capital management (WCM). Yet in extant studies, little is explored on the “adequate” levels of the cash conversion cycle (CCC) and its elements (days of inventory outstanding, days of accounts receivable outstanding, and days of accounts payable outstanding), the typical measures of WCM. Therefore, this study aims to identify an empirically ideal profile of the CCC and its elements of the top performance group in terms of the average net sales growth rate during the global financial crisis and recovery periods, using the data of the Forbes Global 2000 ranking firms in the automotive industry. Then, based on the concept of profile deviation, we analyze its profile difference with other groups in each period, using non-parametric test. The findings provide theoretical and practical implications on effective WCM. © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.