An evaluation of the impact of the global financial crisis on working capital management practices of South African firms

Abstract

This study evaluates the effect of the global financial crisis on the working capital practices of South African firms. Using data that represents a decade before and after the crisis, it examines the working capital practices of firms at a time when cash resources were scarce. The results of the panel data regressions show that the cash conversion cycle became increasingly important to the profitability of firms during and after the financial crisis as firms began to resort to long-term debt to ensure their sustained profitability after the financial crisis. Given the above findings, this study finds support for conservative working capital management practices during non-crisis periods so as to ensure liquidity during crisis periods and for extended periods post a crisis