WORKING CAPITAL DYNAMICS AND FIRM PERFORMANCE: EVIDENCE FROM MALAYSIAN TECHNOLOGY FIRMS
DOI:
https://doi.org/10.33736/uraf.11723.2025Keywords:
Working Capital Management, Cash Conversion Cycle, Average Payment Period, Current Ratio, Leverage, Firm Performance, Return on Equity, Return on Assets, Malaysian Technology Firms, Panel Data AnalysisAbstract
This study examines how working capital management influences the financial performance of technology firms listed in the FTSE Bursa Malaysia Top 100 Index, addressing gaps in sector-specific evidence in Malaysia. Based on recent empirical findings linking WCM practices to profitability, we investigate the effects of the Cash Conversion Cycle, Average Payment Period, Current Ratio, and Leverage in relation to Return on Assets and Return on Equity. Using panel data from 12 firms over 2019–2023, and panel data regression, the Fixed Effects Model (FEM) shows that only LEV significantly and positively affects both ROE and ROA, supporting the Trade-Off Theory. To address endogeneity, the Generalized Method of Moments (GMM) confirms LEV’s significance and further indicates that CCC and CR also influence ROE when dynamic factors are considered. The findings suggest that financial leverage is the primary driver of performance, while efficient WCM enhances shareholder returns under advanced modelling. These findings highlight the critical role of leverage management as part of working capital strategy for Malaysian technology firms.
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