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Working Papers
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Working Capital Management and Profitability of Wine Firms in France: An Empirical Analysis

Working Paper No. 201

Published: 2016
Category:
Business

Working Capital Management and Profitability of Wine Firms in France: An Empirical Analysis

Beysül Aytac, Thi Hong Van Hoang, Amine Lahiani & Laure Michel
Full Text PDF
Abstract
This study investigates the impact of working capital management (WCM) on firm profitability in the French wine industry. Based on annual data of 430 wine-producing firms from 2003 to 2014, we estimated the impact of the cash conversion cycle (CCC) and its components (days inventory, receivable and payable) on the return on assets. Other firm factors, such as size, growth, tangibility and leverage, were used for control. We took into account nonlinearity, unobservable heterogeneity, heteroscedasticity and endogeneity through the two-step GMM estimation method and showed that WCM did not have a significant impact on the profitability of French wine firms. Furthermore, we found no optimal level of CCC that would allow the firms to maximize their profitability. Only days account receivable and payable significantly and negatively impacted profitability. These results differ from those of previous studies and suggest that French wine firms should shorten the time both to collect cash from sales and pay providers. Contrarily to what we believe, the delay in converting inventories to cash does not significantly impact profitability. The managerial implications of these results were further explored by interviewing three wine firms in the south of France.

Submission

Please send your papers as PDF files to the editor, Victor Ginsburgh, at vginsbur@ulb.ac.be
Papers will be quickly reviewed, prior to potential posting on the website. Decision will be to post or not, possibly with short comments, but without referee reports. The decision will be based primarily on the suitability of the paper’s topic to the aims of the Association.
Such decisions are independent of publication decisions for the Journal of Wine Economics.

Working Paper publication requires that at least one author
is a regular member of AAWE.

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