Effects of working capital management on the profitability of small and medium fisheries: Evidence from quantitative research for a low-income country

As perceived in the current situation shaped by the COVID-19 pandemic, the enforcement of credit constraints underscores the importance of effective working capital management (WCM) as a key factor affecting the profitability of small and medium-sized enterprises (SMEs). This research examines the impact of WCM practices on the profitability of small and medium Moroccan fisheries. Morocco has the leading position in Africa as both the primary producer and exporter of fishery products, with the fishing industry playing a crucial role in the country’s economy. In order to evaluate the association between WCM and profitability, this research applied dynamic panel data regression using the generalised method of moments (GMM) to avoid heteroskedasticity, endogeneity, and unbiasedness. Annual data of 100 small and medium fisheries are used for 2015-2020. The dependent variable is expressed as return on assets (ROA); independent variables are cash conversion cycle (CCC), days inventory outstanding (DIO), days sales outstanding (DSO), and days payable outstanding (DPO), and control variables are firm size (FIRM_SIZE), financial leverage (DEBT_RAT), and working capital requirement (WCREQ). Findings reveal a significant relationship between four WCM components (CCC, DPO, DIO and DSO) and profitability (ROA). The study should provide valuable insights for small owner-managers in the fishing sector. It will enhance SMEs' understanding of improving their firm's performance and aid practitioners in forecasting operating cash flows by effectively managing working capital components.