What Determines the Efficiency of Working Capital Among Rajasthan MSMEs?

Authors

  •   Saurabh Chadha Associate Professor, Department of Management, Birla Institute of Technology and Science Pilani (BITS Pilani), Pilani - 333 031, Rajasthan
  •   Deepak Kumar Tripathi Research Scholar, Birla Institute of Technology and Science Pilani (BITS Pilani), Pilani - 333 031, Rajasthan
  •   Ankita Tripathi Research Associate, Birla Institute of Technology and Science Pilani (BITS Pilani), Pilani - 333 031, Rajasthan

DOI:

https://doi.org/10.17010/ijf/2023/v17i6/171942

Keywords:

working capital efficiency

, MSMEs, Rajasthan, cash conversion efficiency, cash conversion cycle, manufacturing

JEL Classification Codes

, C23, D22, G30

Paper Submission Date

, August 30, 2022, Paper sent back for Revision, March 15, 2023, Paper Acceptance Date, April 16, Paper Published Online, June 15, 2023

Abstract

Purpose : This research aimed to gather insights into working capital management (WCM) practices and the factors that influence its efficiency inside the Indian MSMEs’ manufacturing sector using organization variables.

Methodology : For the research, the paper used panel regression methodologies on 147 MSMEs of the most critical production and manufacturing industries from 2012–2021.

Findings : Several firm-specific variables, including leverage, tangibility, firm size, profitability, human capital, asset turnover ratio, and firm growth, were found to have a significant effect on working capital management efficiency (WCE); whereas, the age of the firm and salary expenses were found to have an insignificant impact on working capital management efficiency.

Practical Implications : The study results will facilitate stakeholders to make informed decisions for maintaining the liquidity scenario of the MSMEs by identifying the factors most important for small businesses in Rajasthan. The state can also frame policies concerning the management of the short-term financial position of small businesses.

Originality : Unlike prior research on working capital, the current work explores WCM efficiency comprehensively by including organization factors in Rajasthan manufacturing MSMEs by utilizing two efficiency metrics, that is, the cash conversion cycle (CCC) and cash conversion efficiency (CCE), which have not been studied earlier, especially in the context of Rajasthan.

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Published

2023-06-01

How to Cite

Chadha, S., Kumar Tripathi, D., & Tripathi, A. (2023). What Determines the Efficiency of Working Capital Among Rajasthan MSMEs?. Indian Journal of Finance, 17(6), 45–62. https://doi.org/10.17010/ijf/2023/v17i6/171942

Issue

Volume 17, Issue 6, June 2023

Section

Articles
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