Ekonomi, Politika & Finans Araştırmaları Dergisi, 2022, 7(4): 814-838

Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

Araştırma Makalesi / Research Article, https://doi.org/10.30784/epfad.1205427

THE EFFECT OF WORKING CAPITAL MANAGEMENT ON THE

PERFORMANCE OF THE TEXTILE FIRMS: EVIDENCE FROM
FRAGILE FIVE COUNTRIES (FFCs)*
Çalışma Sermayesi Yönetiminin Tekstil Firmalarının Performansına Etkisi:
Kırılgan Beşli Ülkelerden Kanıtlar
Ayşegül TOY**, Ayhan KAPUSUZOĞLU*** & Nildağ Başak CEYLAN****
Abstract
An effective working capital can contribute to achieving the firm’s financial profitability,
Keywords: increasing the value of companies, creating a short-term financing source, continuing their
Working activities and increasing their sustainability. This study examines the effect of working
Capital capital management on firm performances (ROA and TOBIN's Q) of firms operating in
Management, the textile industry in 4 countries (Brazil, India, Indonesia and Turkey) called the Fragile
Profitability, Five countries between 2010 and 2020. In the estimation of the coefficients of the panel
Firm regression models determined in this study, the Driscoll-Kraay estimator, which is robust
Performance, against the problems of unobserved heterogeneity, autocorrelation, varying variance and
Fragile Five, cross-section dependence, was used. In the general evaluation of the panel data analysis
Driscoll- estimation results, it is seen that the effect of working capital management on financial
Kraay, performance differs significantly depending on the selected performance variable. All of
Textile. these results show that successful and effective working capital management in the textile
sector depends on taking into account the differences in economic conditions, differences
JEL Kodları: in capital markets, financial market performance and daily working habits, and evaluating
G32, C33, M10. each component of working capital separately.
Öz
Anahtar Etkin bir çalışma sermayesi; firmaların finansal karlılığa ulaşmalarını sağlamak,
Kelimeler: firmaların değerlerini artırmak, kısa dönem finansman kaynağı yaratmak, faaliyetlerini
Çalışma devam ettirmek ve sürdürülebilirliklerini artırmak bakımından katkı sağlayabilir. Bu
Sermayesi çalışma, 2010-2020 yılları arasında Kırılgan Beşli ülke olarak adlandırılan 4 ülkedeki
Yönetimi, (Türkiye, Hindistan, Endonezya ve Brezilya) tekstil sektöründe faaliyet gösteren
Karlılık, firmaların çalışma sermayesi yönetimlerinin firma performansları (ROA ve TOBIN’s Q)
Firma üzerindeki etkisini incelemektedir. Bu çalışmada belirlenen panel regresyon modellerinin
performansı, katsayılarının tahmininde, gözlemlenmemiş heterojenlik, otokorelasyon, değişen varyans
Kırılgan Beşli, ve yatay kesit bağımlılığı problemlerine karşı sağlam olan Driscoll-Kraay tahmincisi
Driscoll-Kraay, kullanılmıştır. Panel veri analizi tahmin sonuçlarının genel değerlendirmesinde, işletme
Tekstil sermayesi yönetiminin finansal performans üzerindeki etkisinin seçilen performans
değişkenine bağlı olarak önemli ölçüde farklılaştığı görülmektedir. Bu sonuçların bütünü,
JEL Codes: tekstil sektöründe başarılı ve etkin işletme sermayesi yönetiminin ekonomik koşullardaki
G32, C33, M10. farklılıkları, sermaye piyasalarındaki farklılıkları, finansal piyasa performansını ve günlük
çalışma alışkanlıklarını dikkate almasına ve işletme sermayesini oluşturan her bir unsurun
ayrı ayrı değerlendirilmesine bağlı olduğunu göstermektedir.

*
This paper is based on Aysegul Toy’s Ph.D. Dissertation in Ankara Yıldırım Beyazıt University, Graduate
School of Social Sciences, Ankara, Türkiye.
**
Lecturer, Dr., Sivas Cumhuriyet University, Y.M.Y.O., Türkiye, [email protected], ORCID:
0000-0003-2353-8906
***
Prof. Dr., Ankara Yıldırım Beyazıt University, Faculty of Business, Türkiye,
[email protected], ORCID: 0000-0002-4280-3827
****
Prof. Dr., Ankara Yildirim Beyazit University, Faculty of Business, Türkiye, [email protected],
ORCID: 0000-0003-3128-8863

Received Date (Makale Geliş Tarihi): 15.11.2022 Accepted Date (Makale Kabul Tarihi): 25.12.2022
This article is licensed under Creative Commons Attribution-NonCommercial 4.0
International License.

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 A. Toy, A. Kapusuzoğlu & N.B. Ceylan, “The Effect of Working Capital Management on the
Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

1. Introduction
Financial management decisions are; divided into short-term and long-term financing
decisions. Short-term financial decisions are easier for managers than long-term financial
decisions, but they are never less important (Brealey et al., 2019: 551). Corporate finance
literature focuses on long-term financing decisions such as company valuation, dividend, capital
structure, but since short-term assets and liabilities have a significant share in total assets, working
capital management (WCM), which is the focus of short-term decisions, is also an indispensable
part of financial management (Nazir and Afza, 2009).
Decisions regarding the WCM are about managing cash, stocks, receivables and debts and
are one of the most important issues in finance, especially in today's world (Jose et al., 1996).
Working capital (WC), in its most general sense, refers to the amount of capital a company
attributes to its economic values in an accounting period with a maturity of one year or less. The
absence or inadequacy of WC will prevent a company from operating at full capacity and
producing consistently (Sariaslan and Erol, 2008: 360). Inadequate WC is often considered the
main cause of firm failure (Rafuse, 1996). Due to deficiencies in production as a result of WC
inadequacy, companies will not be able to meet customer demands and orders as they wish, and
they will not be able to reach their targeted sales level (Sariaslan and Erol, 2008: 360). Failure to
manage WC in a planned, efficient, correct and effective manner (Pass and Pike, 1984); It can
cause companies to lose investment opportunities, fail to meet their short-term cash needs,
decrease their profitability and even cause companies to go bankrupt (Samiloglu and Demirgunes,
2008; Brealey et al., 2019: 551).
Conversely, when managers manage their companies' WC efficiently, companies will be
able to cover their short-term costs and liabilities, increase free cash flows in the treasury of the
company, reduce risks and financing needs, and have the opportunity to maximize shareholder
value (Pass and Pike, 1984; Aktas et al., 2015; Berk et al., 2016: 15).
The literature on the WC-profitability relationship has developed and continues to evolve,
especially after Deloof's pioneering work and since the 2007 financial crisis, due to its importance
to companies in these contexts. After the crisis, companies began to investigate the causes of the
collapse of the financial system and to take measures for the financial system again. Firm
managers have had to acknowledge the importance of effectively managing the firm's
profitability, especially in the WC area, in order to prevent further losses and bankruptcies (Jakpar
et al., 2017). As a result, since WCM affects both profitability and risk, and after the crises and
epidemics, especially after the economic difficulties experienced during the COVID-19 process,
the importance of WCM has increased even more. Many companies that cannot effectively
manage their stocks, receivables or especially short-term debts have failed in this process.
Companies give priority to an effective WCM in order to achieve their objectives such as
increasing market value, continuing its operations and generating financial profit. (Hingurala
Arachchi et al., 2017). Managers need to devote a significant amount of time to WCM, which is
one of the most important components of business finance, which has a large share and function
in the success/failure of their companies (Chambers and Cifter, 2022). In fact, it can be said that
the WCM's decisions regarding the management of the investments to be made by the companies
focus on non-long-term financing, in other words, on short-term monetary resources and fields of
activity (Banos-Caballero et al., 2010). The cash that the companies keep in their safes, the
securities that can be converted into cash at any time, the trade receivables obtained as a result of

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Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

the sales and the current assets they hold are evaluated within this scope. It is aimed to keep the
needs to a minimum and to maximize profit and profitability by managing and using these assets
in the most appropriate way (Ganesan, 2007).
Textile, which has an important role in economic development in the world and is accepted
as a locomotive sector with its contribution to exports, production and employment, is one of the
oldest manufacturing industry branches (Hamid et al., 2014). WCM in providing short-term
financing resources to textile companies, like all companies, has important effects on success and
profitability for textile companies as in the other sectors. (Akguc, 2013: 204). This situation has
also been observed in many studies in the literature. (Khan et al., 2011; Tufail and Khan, 2013;
Akbar, 2014; Sheikh et al., 2016) and it was also demonstrated in the analysis performed in this
study. For this reason, it is one of the issues that should be emphasized as much as it is financially
important. In this context, financial managers of textile companies should aim to focus on the
management of each component of WC items that concern financial management, keep the WC
at optimal levels and make the right investments in order to continue their activities with
sustainable profitability and efficiency (Akbar et al., 2020).
Effective policies are needed for WCM as textile companies can increase their profitability
with efficient management and lowest cost financing (Asad, 2012). As a result of effective WC
management in the textile sector, companies with short cash conversion cycle (CCC) will prevent
their external financing calls, borrow less, thus provide interest cost advantage and thus increase
the profitability of textile companies (Tahir and Anuar, 2016).
The importance of using CCC, which is used as a WCM criterion in the study, is first
expressed in Gitman's research (Gitman, 1974). A substantial body of the literature has used CCC
as one of several measures of WCM efficacy. This is because CCC is a powerful measure of
financial performance for assessing how well a firm is managing WC. It indicates how quickly a
firm can convert its initial capital investment into cash. CCC was introduced by Richards and
Laughlin (1980), who suggested it as a dynamic indicator in liquidity analysis, and was later used
in many studies as a benchmark for WCM in terms of its impact on firm profitability and
performance (Shin and Soenen, 1998; Hutchison et al., 2007; Lind et al., 2012; Yazdanfar and
Ohman, 2014) and it has been extended to the study of its impact on firms' profitability (Shin and
Soenen, 1998; Deloof, 2003; Iftikhar, 2013; Yazdanfar and Ohman, 2014).
WC is an important indicator for all companies regardless of their size, showing their
financial position and corporate liquidity (Entrepreneur, 2013). However, WC in particular is
more important in developing countries than in developed countries. Effective management of
WC is essential for companies operating in developing economies due to their limited use of
funds, difficult access to capital through external financing due to inactive capital markets,
difficulties in finding long-term funds and exposure to high interest rates. Because WC, which is
the source of internal financing, is the primary source for them. (Allen et al., 2012; Zariyawati et
al., 2016).
"Brazil, Indonesia, Turkey, South Africa and India", which are called the "Fragile Five"
and are also among the developing countries, are in the top ten of the world lists. In this direction,
the aim of this study is to empirically examine the effect of WC variables on financial performance
with a sample consisting of companies operating in the textile sector of the "Fragile Five"
countries in the period of 2010-2020. South African textile companies, one of the Fragile Five
countries, could not be included in the sample due to lack of data.

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 A. Toy, A. Kapusuzoğlu & N.B. Ceylan, “The Effect of Working Capital Management on the
Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

This study contributes to the past literature on WCM in four ways: First, this study is the
first to examine textile firms' WCM in FFCs using panel data regression analysis. Secondly, this
study adds to the available knowledge about the relationship between WC and financial
performance by using the most up-to-date data of textile companies operating in FFCs. Third, the
results of this study provide guidance to managers operating in the textile industry to develop
meaningful strategies to effectively manage WC and improve financial performance. Finally,
panel data methodology based on the Driscoll-Kraay standard error estimator was used to deal
with variance, autocorrelation, cross-section dependence, and unobservable heterogeneity.

2. Literature Review
Many applied studies in literature show that effective management of WC is associated
with higher firm performance and firm value. Therefore, WC decisions that focus on short-term
financing and investment decisions can provide companies with a competitive advantage, increase
profitability and performance, and contribute significantly to the development of the real sector
and financial markets. As a result, efficient WCM is of great importance not only for corporate
governance but also for all stakeholders.
When the former studies focusing on the association between WC variables and financial
performance are examined, it has been observed that various variables are employed to measure
WC elements. For example, researchers such as Deloof (2003), Lazaridis and Tryfonidis (2006),
García-Teruel and Martínez-Solano (2007), Mathuva (2010), Sharma and Kumar (2011), and
Abuzayed (2012) have employed the accounts receviables period (ARP), the inventory holding
period (IHP), the accounts payable period (APP), and CCC variables to represent WC in their
studies. However, researchers such as Mun and Jang (2015), Saglam and Karaca (2015), Boțoc
and Anton (2017), Anton and Afloarei Nucu (2020), Osama and Al-Gazzar (2021), Chambers
and Cifter (2022), and Jaworski and Czerwonka (2022) have utilized the WC ratio in their studies
to measure WC.
The literature offers five groups of conflicting results concerning the influence of WC
variables on financial performance: (i) WC variables have a negative influence on financial
performance, (ii) WC variables have a positive impact on financial performance, (iii) there exist
blended results between WC components and financial performance measures, (iv) WC variables
has a neutral influence on financial performance, and (v) there exists a non-linear association
between WC variables and financial performance.
The first group of studies suggesting a negative relationship between WC variables and
financial performance are Yucel and Kurt (2002), Nobanee et al. (2011), Ebben and Johnson
(2011), Ogundipe et al. (2012), Enqvist et al. (2014), Yazdanfar and Ohman (2014), Sensini
(2020), Lin and Wang (2021), and Jaworski and Czerwonka (2022). These studies reported that
the effect of CCC on financial performance variables is negative. Also, Deloof (2003), García‐
Teruel and Martínez‐Solano (2007), Mansoori and Muhammad (2012), Aygun (2012), Ukaegbu
(2014), Pais and Gama, (2015), Hussain et al. (2021), Gołaś (2020), on the other hand, reported
that there is a negative correlation between the CCC and the elements that make up the CCC and
performance indicators.
The studies in the second group, which argue that WC variables have a positive effect on
financial performance, are as follows; Alvarez et al. (2021) have provided empirical evidence that

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Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

there is a positive relationship between financial performance as measured by ROA and ROE and
all WC components for Argentine manufacturing firms. Also, Saglam and Karaca (2015) have
reported that financial performance indicators for Turkish textile companies are positively
affected by the WC ratio. Similarly, Amponsah-Kwatiah and Asiamah (2020) have revealed that
WC components have positive effects on both ROA and ROE.
Lazaridis and Tryfonidis (2006), Mathuva (2010), Sharma and Kumar (2011), Abuzayed
(2012), Napompech (2012), Vahid et al. (2012), Ademola (2014), Samiloglu and Akgun (2016),
Keskin and Gokalp (2016), Kayani et al. (2019), Braimah et al. (2021), and Durdu and Aydin
(2021) are among the third group of studies suggesting blended results between WC components
and financial performance measures.
The studies conducted by Atmaca (2016) and Ahmed et al. (2017) can be given as an
example of the fourth group of studies that determined that there is no linkage between WC
variables and financial performance.
As the last group works, the findings regarding the existence of a nonlinear relationship
between WC variables and financial performance have been reported in empirical studies
conducted by Afrifa et al. (2014), Mun and Jang (2015), Boțoc and Anton (2017), Singhania and
Mehta (2017), Anton and Afloarei Nucu (2020), Prempeh and Peprah-Amankona (2020),
Ahangar (2021), Akbar et al. (2021), Chambers and Cifter (2022), and Ersoy et al. (2022)
Jaworski and Czerwonka (2022).

3. Methodology
3.1. Dataset and Descriptive Statistics
This study aims to analyze the influence of WC elements on textile firms’ financial
performance in fragile five countries. However, South African companies are not included in the
sample due to lack of data. In this context, of the textile companies that made up our sample, 12
operate in Brazil, 11 in Indonesia, 17 in Turkey, and the remaining 145 in India. Financial data
of textile firms over the period of 2010–2020 are obtained from Thomson Reuters Eikon database.
Econometric analyses were performed using the Stata 17 software. Our sample is a balanced panel
dataset. All firm-level variables are winsorized at 1% and 99% levels to minimize the influence
of possible spurious outliers. The variables employed in this study and their influence on financial
performance are shown in Table 1.

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 A. Toy, A. Kapusuzoğlu & N.B. Ceylan, “The Effect of Working Capital Management on the
Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

Table 1. Definitions of Variables

Variable Measure Notation Expected Sign
Dependent variables
Return on Assets Net profit/total assets ROA
(The market value of equity + short- and long-
Tobin’s Q TQ
term liabilities)/total assets.
Independent variables
Accounts receivable period [Average receivables * 365/sales] ARP +/-
Inventory holding period [Average inventories * 365/cost of goods sold] IHP +/-
Accounts payable period [Average payables * 365/cost of goods sold] APP +/-
Cash conversion cycle [ARP + IHP-APP] CCC +/-
Control variables
Current ratio Total current assets/total current liabilities CR +
Leverage The ratio of total debt to total assets. LEV -
Firm size Natural logarithm of total assets SIZ +/-
Growth (Current year sales/ previous year sales) – 1 GRO +/-

Descriptive statistics values calculated for all variables used in the analysis are shown in
Table 2. According to the summary statistics calculated for all textile companies regarding these
variables, the average value of the ROA variable is approximately 2.2%. The average value of
Tobin's Q is about 1.19. When the summary statistics presented in Table 2 are analyzed in terms
of WC variables, the ARP variable has an average value of about 54. This means that textile firms
give their customers about 54 days to pay their dues. In other words, firms tend to collect their
receivables on sales after an average of 54 days. With regard to IHP variable, it is found that mean
value of IHP is close to 126 days. This means that textile firms wait about 126 days to convert
their inventories into sales. The APP variable has an average value of about 60. This statistic
demonstrates that textile firms tend to pay their debts within 60 days. Finally, the average CCC
is approximately 118 days.

Table 2. Descriptive Statistics for Full Sample

Variable Mean SD Median Min Max N
ROA 0.022 0.060 0.0235 -0.122 0.133 2035
TQ 1.191 0.685 0.940 0.031 3.226 2035
ARP 53.898 37.669 46.024 1.583 139.671 2035
IHP 125.753 71.776 112.04 28.070 302.681 2035
APP 60.189 39.830 53.280 6.545 152.883 2035
CCC 117.874 78.270 108.328 -11.913 295.048 2035
CR 1.734 1.293 1.284 0.493 6.102 2035
LEV 0.609 0.222 0.628 0.192 1.067 2035
SIZ 18.158 1.318 18.058 15.884 20.741 2035
GRO 0.010 0.200 0.0246 -0.450 0.368 2035

Summary statistics obtained using sub-samples of textile companies operating in Brazil,

Indonesia, Turkey and India are reported in Table 3. Columns 1, 4, 7, and 10 of Table 3 report the
mean values of variables for firms in Brazil, Indonesia, Turkey, and India, respectively.
According to Table 3, the textile firms with the highest ROA with an average value of 0.025
are Indian companies. The positive average ROA value of textile companies in other countries
indicates that companies operating in the textile industry are profitable companies. According to
Table 3, the fact that the average Tobin's Q value of the textile companies operating in all 4

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 Ekonomi, Politika & Finans Araştırmaları Dergisi, 2022, 7(4): 814-838
Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

countries is above 1 indicates that these companies, on average, create value for their
shareholders.
Among the textile firms operating in 4 countries, Indonesian textile firms expect their
customers to pay their debts in approximately 43 days, while Brazilian textile firms provide their
customers with an average of 96 days to pay their debts. This result demonstrates that the firms
that make the fastest (slowest) collection on their sales are Indonesian (Brazilian) textile
companies.
Regarding the IHP variable, compared to firms in other countries, Brazilian firms tend to
convert their inventories into sales in a shorter time (an average of 112 days). With regard to the
APP variable, compared to firms in other countries, Brazilian firms tend to convert their
inventories into sales in a shorter time (an average of 112 days). Concerning the ARP variable,
Turkish firms take longer time to pay back their debts when compared to firms in other countries.
Interestingly, regarding the CCC variable, the study reveals that Brazilian firms take a longer time
(an average of 150 days) to complete the conversion cycle as compared to firms in other countries.

Table 3. Descriptive Statistics for Sub-Samples (Brazil, Indonesia, Turkey, and India)
Brazil Indonesia Turkey India
Mean SD N Mean SD N Mean SD N Mean SD N
ROA 0.008 0.086 132 0.009 0.064 121 0.019 0.067 187 0.025 0.056 1595
TQ 1.402 0.782 132 1.263 0.727 121 1.256 0.651 187 1.161 0.674 1595
ARP 95.760 23.403 132 43.118 21.458 121 64.582 35.977 187 49.998 37.381 1595
IHP 111.656 44.474 132 120.490 80.114 121 117.239 71.760 187 128.317 72.757 1595
APP 54.442 42.815 132 53.038 35.205 121 76.672 38.187 187 59.274 39.635 1595
CCC 149.802 77.984 132 109.806 79.654 121 105.903 74.756 187 117.248 77.981 1595
CR 2.062 1.733 132 1.635 1.251 121 1.588 1.239 187 1.732 1.256 1595
LEV 0.614 0.307 132 0.611 0.278 121 0.539 0.212 187 0.617 0.208 1595
SIZ 19.556 0.955 132 18.795 0.946 121 18.565 1.237 187 17.946 1.281 1595
GRO -0.045 0.228 132 -0.001 0.184 121 -0.023 0.214 187 0.019 0.196 1595

3.2. Econometric Model

Following Deloof (2003), Zariyawati et al. (2009), Banos-Caballero et al. (2007), Sharma
and Kumar (2011), and Singhania and Mehta (2017), the two-way fixed effects equations are
estimated to investigate the association between WCM and financial performance.
4 11−1

(𝐹𝑃)𝑖𝑡 = 𝛼0 + ɣ(𝐴𝑅𝑃)𝑖𝑡 + ∑(𝐹𝐿𝐶𝑉)𝑖𝑡 𝛽𝑗 + ∑ 𝜆𝑡 (𝑌𝑒𝑎𝑟)𝑡 + 𝜀𝑖𝑡 (Model 1)

𝑗=1 𝑡=1
4 11−1

𝐹𝑃)𝑖𝑡 = 𝛼0 + ɣ(𝐼𝐻𝑃)𝑖𝑡 + ∑(𝐹𝐿𝐶𝑉)𝑖𝑡 𝛽𝑗 + ∑ 𝜆𝑡 (𝑌𝑒𝑎𝑟)𝑡 + 𝜀𝑖𝑡 (Model 2)

𝑗=1 𝑡=1
4 11−1

(𝐹𝑃)𝑖𝑡 = 𝛼0 + ɣ(𝐴𝑃𝑃)𝑖𝑡 + ∑(𝐹𝐿𝐶𝑉)𝑖𝑡 𝛽𝑗 + ∑ 𝜆𝑡 (𝑌𝑒𝑎𝑟)𝑡 + 𝜀𝑖𝑡

𝑗=1 𝑡=1 (Model 3)

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 A. Toy, A. Kapusuzoğlu & N.B. Ceylan, “The Effect of Working Capital Management on the
Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

4 11−1

(𝐹𝑃)𝑖𝑡 = 𝛼0 + ɣ(𝐶𝐶𝐶)𝑖𝑡 + ∑(𝐹𝐿𝐶𝑉)𝑖𝑡 𝛽𝑗 + ∑ 𝜆𝑡 (𝑌𝑒𝑎𝑟)𝑡 + 𝜀𝑖𝑡 (Model 4)

𝑗=1 𝑡=1

In these models, subscripts i and t represent individual firm and year, respectively. 𝛼0 is
the intercept. FPit is the dependent variable, and it is measured by accounting-based financial
performance (ROA) and market-based financial performance (Tobin’s Q). ARPit , IHPit , 𝐴𝑃𝑃it ,
and CCCit are the independent variables and they represent WC variables such as ARP, IHP, APP,
and CCC. The term β is the vector of coefficients to be estimated. In the above equations, FLCVit
is a vector of independent variables consisting of the variables such as current ratio, growth, firm
size, and leverage. The coefficients 𝛼0 , ɣ, βj , and 𝜆t are the parameters to be estimated. εit =
⍵i + uit , where ⍵i demonstrates time-invariant firm-level fixed effects and uit denotes the
random error terms.

3.3. Method
The econometric analysis consists of the following steps: Firstly, Spearman correlation
analysis is carried out to determine whether there is a multicollinearity problem between the
independent variables and control dependent. Secondly, as it is known, there are three traditional
estimators used to estimate coefficients in panel data regression analysis in the literature. These
are the Pooled OLS (POLS), random effects (REs), and fixed effects (FEs) estimators,
respectively. The POLS is ignored in this study. Because it is based on the assumption that there
is no correlation between independent variables and firm-specific fixed effects. Also, the POLS
estimation assumes no unit and time effects, which is not a realistic assumption. As a result, the
Hausman test is employed to choose between the remaining two estimators (i.e, REs and FEs).
The Hausman test is based on the null hypothesis that the REs model is more appropriate than the
FEs model (Baum, 2006).
Third, after it was decided that the FEs (REs) estimator was the most appropriate estimator
for the estimation of the coefficients in the financial performance model, diagnostic tests were
conducted to investigate the existence of serial correlation, varying variance and cross-section
dependence in error terms in the panel data model. For diagnostic tests, Wooldridge test (Drukker,
2003) for serial correlation, Modified Wald test (Levene) (Baum, 2001) for varying variance and
Pesaran CD test (De Hoyos and Sarafidis, 2006) were used for cross-section dependence,
respectively. The Wooldridge test is based on the null hypothesis that there is no serial correlation
in the data. While the modified Wald (Levene) test is based on the null hypothesis that there is no
heteroscedasticity, the Pesaran CD test is also based on the null hypothesis that there is no cross-
sectional dependence.
Finally, if serial correlation, varying variance, and cross-section dependence are detected
in the panel data, the Driscoll and Kraay (1998) estimator, which uses regressions of FEs or REs,
was used to obtain robust test statistics (Hoechle, 2007).

3.4. Investigation of Multi-Collinearity Problem

The correlations between the independent and control variables were estimated in the
analysis, and the estimated coefficients of the correlation coefficients between the independent

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Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

and control variables used in the regression models for the full sample are shown in Table 4. A
negative and significant correlation (-0.628) was found between the CR and LEV variables. On
the other hand, CCC shows a significant positive correlation with IHP (0.719). More importantly,
the predicted high correlation coefficient between CCC and IHP indicates that including the two
variables in the same regression model will result in multicollinearity. As a result, the fact that
other estimated correlation coefficients are lower than 0.80 reveals that multicollinearity is not a
significant problem in terms of other variables (Kennedy, 2003; Gujarati, 2004).
Estimated correlation coefficients analysis was performed for the sub-samples of Brazil,
Indonesia, Turkey and India, and all these results show that the WC components should be
modeled separately.

Table 4. Spearman Correlation Between Independent and Control Variables for Full Sample
ARP IHP APP CCC CR LEV SIZ GRO
ARP 1.000
IHP 0.041* 1.000
APP 0.190*** 0.239*** 1.000
CCC 0.373*** 0.719*** -0.195*** 1.000
CR 0.123*** 0.115*** -0.179*** 0.271*** 1.000
LEV -0.078*** -0.024 0.181*** -0.152*** -0.628*** 1.000
SIZ -0.008 0.101*** -0.023 0.103*** -0.067*** 0.048** 1.000
GRO -0.117*** -0.045 -0.073*** -0.056** 0.139*** 0.036 0.061** 1.000
Note: ***, ** and * indicate the level of significance at 1%, 5%, and 10%.

4. Estimation Results of Panel Data Models

In this part of the study, firstly, the estimation results obtained from the models in which
ROA, an accounting-based performance measure, is the dependent variable, are summarized.
Then, the findings obtained from the models in which Tobin's Q, which is a market-based
performance measure, is employed as the dependent variable, are given.

4.1. Estimation Results of ROA Models

Table 5 reports the values of the estimated coefficients of the regression models shown in
Equations (Model1) -(Model4). The model goodness of fit (R2) demonstrates that about 18% of
the variation in ROA of textile companies is explained by the independent and control variables
used in the regression models. Moreover, according to the results of the F statistic, which tests
whether the models are significant or not, it has been decided that all models are significant.
As can be seen at the bottom of Table 5, Hausman statistics for all models are highly
significant. Therefore, a fixed effects estimator is used to estimate the effect of WC variables on
ROA for the full example in the analysis. Before reporting the analysis results, three important
assumptions concerning the error process, i.e. heteroscedasticity, serial correlation, and cross-
sectional dependence are tested under a fixed effect specification, respectively, employing the
Modified Wald test, Wooldridge test, and Pesaran CD test. The results reported at the bottom of
Table 5 demonstrate the presence of heteroscedasticity, serial correlation, and cross-sectional
dependence. Because the statistics that test these assumptions are highly significant. Therefore,

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Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

all the models are estimated based on the Driscoll-Kraay standard errors estimator utilizing FEs
regression to overcome these issues.

Table 5. Estimation Results of the Driscoll-Kraay Standard Errors Estimator for the Full Sample
Dependent Variable: ROA
(Model1) (Model 2) (Model 3) (Model 4)
0.000*
ARP
(0.000)
0.000
IHP
(0.000)
0.000
APP
(0.000)
0.000
CCC
(0.000)
0.002 0.002 0.003 0.002
CR
(0.002) (0.002) (0.002) (0.002)
-0.119*** -0.119*** -0.121*** -0.119***
LEV
(0.010) (0.010) (0.010) (0.010)
-0.012*** -0.012** -0.012*** -0.012**
SIZ
(0.004) (0.004) (0.004) (0.004)
0.057*** 0.057*** 0.057*** 0.056***
GRO
(0.011) (0.012) (0.011) (0.012)
0.296*** 0.304*** 0.295*** 0.300***
cons
(0.071) (0.081) (0.072) (0.077)
Hausman 66.70*** 59.10*** 66.43*** 57.85***
Wooldridge 13.928*** 15.041*** 31809.32*** 15.653***
Modified
31197.17*** 31138.63*** 31809.32*** 30953.82***
Wald
Pesaran's CD 17.502*** 17.790*** 18.414*** 17.363***
Within R2 0.178 0.177 0.178 0.177
F-statistic 597.60*** 66.37*** 61.86*** 55.48***
Obs. 2035 2035 2035 2035
No of firms 185 185 185 185
Estimator DK-FE DK-FE DK-FE DK-FE
Notes: Robust standard errors are reported in parentheses. DK-FE is the Driscoll-Kraay standard errors
estimator using FEs regression. * p < 0.10, ** p < 0.05, *** p < 0.01

After giving the estimation results for the firms in the full sample, the main sample was
divided into sub-samples considering the four countries included in the study. Thus, the regression
models given in Equations (1)-(4) are re-estimated for textile companies in different countries.
Estimation results for Brazilian, Indonesian, Turkish and Indian firms are given in Table 8-11 in
the appendix, respectively.

4.2. Estimation Results of Tobin's Q Models

In study, the estimation results obtained from the models in which Tobin's Q variable,
which is a market-based financial performance measure, is the dependent variable, are presented
in Table 6. As can be seen at the bottom of Table 6, the R2 values of the regression models vary
between approximately 17% and 18%. Furthermore, the significant F-values imply that all the
independent and control variables included in the financial performance model are important for
explaining the variations in textile firms' financial performance.

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Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

The highly significance of the statistics for the Hausman test reported in the bottom of
Table 6 for the full sample reveals that the FEs estimator is the most appropriate estimator in the
estimation of model parameters. In the study, three important assumptions regarding error
processes are tested under the fixed effects model, following the determination of the most
appropriate panel estimate. Results for the assumptions such as heteroscedasticity, serial
correlation, and cross-sectional dependence are reported in Table 6. The highly significance of
the test statistics for these assumptions reveal the presence of heteroscedasticity, serial correlation,
and cross-sectional dependence in the FEs models' error terms. Thus, to deal with these problems,
all the regression models for the full sample are estimated employing the Driscoll-Kraay standard
errors estimator based on FEs regression.

Table 6. Estimation Results of the Driscoll-Kraay Standard Errors Estimator for the Full Sample
Dependent Variable: TQ
(Model1) (Model2) (Model3) (Model4)
-0.001
ARP
(0.001)
-0.001***
IHP
(0.000)
0.000
APP
(0.000)
-0.001**
CCC
(0.000)
0.024** 0.028** 0.024** 0.032***
CR
(0.009) (0.009) (0.009) (0.008)
0.629*** 0.654*** 0.624*** 0.618***
LEV
(0.141) (0.139) (0.137) (0.129)
-0.258*** -0.234*** -0.261*** -0.231***
SIZ
(0.023) (0.024) (0.026) (0.020)
0.180*** 0.156*** 0.188*** 0.161***
GRO
(0.043) (0.037) (0.049) (0.037)
5.565*** 5.179*** 5.565*** 5.146***
cons
(0.438) (0.443) (0.454) (0.384)
Hausman 66.12*** 62.22*** 74.35*** 60.59***
Wooldridge 44.807*** 45.088*** 45.142*** 44.324***
Modified Wald 2.0e+05*** 2.0e+05*** 2.1e+05*** 1.9e+05***
Pesaran's CD 53.889*** 57.744*** 49.692*** 56.201***
Within R2 0.176 0.182 0.173 0.188
F-statistic 56.77*** 142.46*** 1201.65*** 161.83***
Obs. 2035 2035 2035 2035
No of firms 185 185 185 185
Estimator DK-FE DK-FE DK-FE DK-FE
Notes: Robust standard errors are reported in parentheses. DK-FE is the Driscoll-Kraay standard errors
estimator using FEs regression. * p < 0.10, ** p < 0.05, *** p < 0.01

After giving the estimation results for the firms in the full sample, the main sample was
divided into sub-samples considering the four countries included in the study. Thus, the regression
models given in Equations (1)-(4) are re-estimated for textile companies in different countries.
Estimation results for Brazilian, Indonesian, Turkish and Indian firms are given in Table 12-15.
in the appendix, respectively.

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 A. Toy, A. Kapusuzoğlu & N.B. Ceylan, “The Effect of Working Capital Management on the
Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

4.3. Summary of Findings from Regression Models

The findings from the regression models are summarized in Table 7. The findings obtained
from the ROA model covering all textile companies can be summarized as follows; There exists
a positive and statistically significant connection between ARP and ROA. This result shows that
the longer the ARP, the higher the profitability of the firm. This finding supports the finding of
Amponsah-Kwatiah and Asiamah (2020). No significant relation is found between other variables
(IHP, APP and CCC) representing WC strategies and ROA. As for firm-level control variables,
it is concluded that the variables like firm size, financial leverage and sales growth except for
liquidity variable are significant determinants of ROA.

Table 7. The Summary of The Results from The Regression Model

Full Sample Brazil Indonesia Turkey India
ROA TQ ROA TQ ROA TQ ROA TQ ROA TQ
ARP (+)* (-)** (-)** (+)** (-)*
ICP (-)*** (-)** (-)* (-)***
APP (+)* (+)***
CCC (-)** (-)* (-)*** (-)** (-)**
Notes: * p < 0.10, ** p < 0.05, *** p < 0.01 (-) : Negative relationship (+): Positive relationship.

The findings of the estimated ROA model using Brazilian textile companies can be
summarized as follows; It has found a negative association between ARP and ROA. This
conclusion is supported by many studies (e.g., Deloof, 2003; García‐Teruel and Martínez‐Solano,
2007; Mansoori and Muhammad, 2012; Pais and Gama, 2015; Samiloglu and Akgun, 2016;
Keskin and Gokalp, 2016; Kayani et al., 2019; Gołaś, 2020; Singh, 2021) in the previous
literature. The findings indicate that an increase in CCC leads to a decrease in ROA. This finding
is consistent with the results of the studies carried out by Yucel and Kurt (2002), Deloof (2003),
García‐Teruel and Martínez-Solano (2007), Mansoori and Muhammad (2012), Ogundipe et al.
(2012), Aygun (2012), Enqvist et al. (2014), Yazdanfar and Ohman (2014), Pais and Gama,
(2015), Dalci et al. (2019), Kayani et al. (2019), NGuyen et al. (2020), Gołaś (2020), Braimah et
al. (2021), and Singh (2021). This result shows that the managers of companies operating in the
textile sector in Brazil manage their WC more efficiently. The findings also demonstrate that the
estimated coefficients of IHP and APP are not significant. Regarding firm-level control variables,
it is concluded that financial leverage and sales growth are significant variables in ROA models.
The findings of the estimated ROA model using Indonesian textile companies can be
summarized as follows; Neither CCC nor the variables constituting CCC are found to be
statistically significant in explaining the change in the ROA models. While the effect of financial
leverage and sales growth is significant, the influence of liquidity and firm size are not significant.
The results of the estimated ROA model for companies operating in the Turkish textile
sector are as follows; Among the WC variables, the only variable that is statistically significant
is ARP. The effect of this variable is positive. This finding shows that companies with high trade
receivables tend to generate more revenue by offering longer payment opportunities to their
customers. The estimated positive coefficient of the ARP variable is also consistent with those of
the study conducted by Sharma and Kumar (2011), Amponsah-Kwatiah and Asiamah (2020) and
Alvarez et al. (2021). Other WC variables are not significant determinants of ROA. These results,
found for Turkish companies, are similar to those of the study conducted by Atmaca (2016). Firm

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Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

size, financial leverage and growth in sales are found to be significant in explaining the change
in ROA.
The findings of the ROA model employing Indian textile companies can be summarized as
follows; Estimation results for Indian textile companies show that the coefficients of variables
representing WC indicators are not found statistically significant at any significance level Sharma
and Kumar (2011) reported that the estimated coefficients of all WC variables are insignificant
except for the ARP variable for 263 non-financial Indian firms. Similar findings were also
reported by Vahid et al. (2012) for 50 Iranian pharmaceutical and cement companies. As for the
control variables, firm size, financial leverage and sales growth have a significant impact on ROA.
However, it has not been determined that liquidity level has a significant effect on ROA.
The results obtained from the Tobin’s Q model for all textile companies can be summarized
as follows; It is observed that the coefficients of the IHP and CCC variables are negative and
significant. Results from IHP and CCC variables are similar to the those of Ogundipe et al. (2012)
and NGuyen et al. (2020) but different from the results reported by Abuzayed (2012). In addition,
ARP and APP variables are not statistically significant determinants of Tobin’s Q of textile firms.
All firm-level variables included in Tobin's Q model are significant.
The findings of the Tobin’s Q model using Brazilian textile companies can be summarized
as follows; The estimation results imply that there exists no significant link between WC
components and market performance measured by Tobin's Q. Similarly, Abuzayed (2012)
reported similar findings for a sample including Jordanian firms, except for the APP variable.
Regarding the control variables, it observes that liquidity ratio, firm size and leverage have a
negative and statistically significant effect on market performance of the firms.
The findings of the estimated Tobin’s Q model employing textile companies in Indonesia
can be summarized as follows; All variables employed to measure WC policies are found to be
significant in the Tobin’s Q model. More specifically, the predicted coefficients of the ARP, IHP,
and CCC variables are negative while the predicted coefficients of the APP variable are positive
The negative and significant coefficients of the ARP, IHP, and CCC variables are consistent with
those of Hingurala et al. (2017). Moreover, Perera and Priyashantha (2018) found in their study
that the coefficient of APP was positive. Among the firm level control variables, financial
leverage and firm’s size are the significant variables in the Tobin’s Q model.
The results of Tobin’s Q model for the Turkish textile companies are as follows; There is
a significant correlation between APP, IHP, and CCC variables and Tobin’s Q. The influence of
IHP and CCC is negative. It shows that a reduction in the IHP and CCC period can help improve
firm value. Whereas, the effect of the APP variable is positive. It shows that the increase in debt
payment periods of Turkish textile companies contributes to the market value. These results are
in line with the results of the study conducted by Aygun (2012), except for the APP variable.
Tobin’s Q is significantly correlated with financial leverage and firm size.
The findings of Tobin’s Q model for Indian textile companies can be summarized as
follows; It is observed that the coefficients of all variables, except APP, are negative and
statistically significant. These results imply that lower ARP, IHP, and CCC enhance market based
financial performance of Indian textile companies. Tobin's Q is significantly correlated with
liquidity level, financial leverage, firm size, and sales growth. More specifically, variables like

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Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

liquidity level, financial leverage, and sales growth enhance firms' market performance. However,
firm size leads to a decrease in the market performance of firms.
According to the results of the study; in the ROA model, the ARP variable is negative for
Brazilian textile firms and positive and statistically significant for Turkish textile firms. In the
Tobin's Q model, the ARP variable is found to be negative and statistically significant for
Indonesian and Indian firms. There may be a number of reasons for the effect of receivable
collection periods on the performance of firms. Accounts receivable can be considered as trade
credit given by the firms to customers. In connection with the cost and benefit of accounts
receivable, firms may offer shorter or longer trade credits to their current or potential customers.
First, offering customers a longer credit period can help increase the firm's profitability
performance by attracting new customers who normally can't afford to buy and have financial
problems. However, as the trade credit extension decisions taken by the companies will cause the
opportunity costs to increase, the increased costs may also harm the companies' profitability
(Braimah et al., 2021; Rey-Ares et al., 2021).
Because inventories are an important cost element, especially for manufacturing
companies, inventory management policies are one of the critical success factors that directly
impact company profitability and performance. On the other hand, however, holding a high level
of inventory can increase various costs (security costs, heating, theft, rent, obsolesce, etc.)
associated with inventories, which can harm firm profitability and value (Afrifa et al., 2014). In
this context, according to the TQ performance criterion in this study, the fact that textile firms in
Indonesia, Turkey and India have less inventory may be the reason for their improved
performance.
According to the TQ model, the APP variable was found to be positive and statistically
significant only for textile firms in Indonesia and Turkey. A delay in payments to suppliers of the
firm not only enables companies to evaluate the quality of purchased products and services, but
also provides companies with a cheap source of financing. Therefore, this can lead to an increase
in the profitability of the company. (Alvarez et al., 2021; Othuon et al., 2021).
Among the textile firms in the study, Brazilian firms were found negative and statistically
significant according to ROA model, while Indonesia, Turkey and India were found negative and
statistically significant according to TQ model. The firm's more efficient management of WC may
be associated with a shorter CCC. Because firms with a shorter CCC have more cash flow and a
more aggressive WC policy, which indicates that they will seek less external financing and be
more profitable. Thus, a short CCC may be beneficial for firm financial performance (Banos-
Caballero et al., 2013; Hussain et al., 2021).

5. Conclusion
In this study, it is aimed to empirically investigate whether there is an association between
WC variables and financial performance measures. Firms operating in the textile sector of the
FFCs (i.e., Brazil, South Africa, Indonesia, Turkey and India) in the period covering the years
2010-2020 constitute the sample of study. South African companies, however, are not included
in the sample due to lack of data. Finally, of the textile firms that made up sample, 12 operate in
Brazil, 11 in Indonesia, 17 in Turkey, and the remaining 145 in India. In line with the previous
literature, ROA and Tobin's Q are employed as financial performance indicators of textile firms,

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Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

respectively. The variables that are frequently used in the WC indicator such as ARP, IHP, APP,
and CCC are included in the regression models as independent variables. In addition, firm-level
control variables such as firm size, financial leverage, sales growth and liquidity level are also
included in the regression models.
Before estimating the coefficients in the regression models determined in the study, the
correlation coefficients between the variables were calculated by using the Spearman test to
investigate the multi-collinearity. Then, summary statistics on the financial variables used in the
study are given. The Hausman test was used to determine the most suitable estimator within the
framework of static panel data analysis.
Following deciding that the FEs (REs) estimator is the most appropriate estimator for the
estimation of the coefficients in the financial performance models, it carried out diagnostic tests
to investigate the presence of serial correlation, heteroscedasticity, and cross-sectional
dependence in the error terms in the panel data. Robust estimators are used to make parameter
estimations as a result of the diagnostic tests performed.
The results obtained from this study have important implications for all stakeholders in the
textile industry. When the panel data analysis estimation results are evaluated in general, it can
be stated that the influence of WCM on financial performance differs significantly according to
the selected performance variable. In addition, when the main sample is divided into sub-samples,
the linkage between WC variables and financial performance variables tends to change. When all
these findings are assessed together, it can be concluded that successful WCM in the textile sector
depends on both taking into account the differences between countries (in terms of economic
conditions, development of capital and financial markets, daily work habits, WC policies
followed, etc.) and evaluating each element that forms the WC individually. The results of this
study will guide managers working in the textile industry to develop the right strategies to
effectively manage WC and improve financial performance. As a result of these suggestions,
firms can contribute to both themselves and the national economies by taking WCM into
consideration.
Regarding the research topic, the influence of WC components can be investigated in depth
by using different performance measures in future studies. In addition, future studies can benefit
from dynamic panel methodology. Moreover, the research subject can be deepened through
samples consisting of different country groups. Finally, non-linear relationships can be tested in
the relationship between WCM and financial performance.

Declaration of Research and Publication Ethics

This study which does not require ethics committee approval and/or legal/specific permission complies
with the research and publication ethics.
Researcher’s Contribution Rate Statement
The authors declare that analysis part was carried out by first author, the other parts were made all authors
equally.
Declaration of Researcher’s Conflict of Interest
There is no potential conflicts of interest in this study.

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Performance of the Textile Firms: Evidence from Fragile Five Countries (FFCs)”

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(FFCs)”

Appendix
Table 8. Estimation Results of the Driscoll-Kraay Standard Errors
Estimator for Brazil Table 9. Estimation Results of the Fixed Effects Estimator for Indonesia
Dependent Variable: ROA Dependent Variable: ROA
(1) (2) (3) (4) (1) (2) (3) (4)
-0.000** 0.000
ARP ARP
(0.000) (0.000)
-0.000 0.000
IHP IHP
(0.000) (0.000)
0.000 -0.000
APP APP
(0.000) (0.000)
-0.000* 0.000
CCC CCC
(0.000) (0.000)
0.013 0.009 0.010 0.012 -0.002 -0.001 -0.002 -0.002
CR CR
(0.011) (0.010) (0.010) (0.010) (0.003) (0.003) (0.004) (0.004)
-0.145** -0.154** -0.172*** -0.164**
LEV -0.145*** -0.136*** -0.142*** -0.140***
(0.056) (0.051) (0.054) (0.053) LEV
(0.024) (0.029) (0.025) (0.026)
0.006 0.001 0.001 0.006
SIZ -0.007 -0.006 -0.007 -0.005
(0.014) (0.017) (0.017) (0.015) SIZ
(0.009) (0.016) (0.010) (0.015)
0.075*** 0.076*** 0.076*** 0.076***
GRO 0.106*** 0.098*** 0.099*** 0.102***
(0.013) (0.016) (0.013) (0.015) GRO
0.037 0.126 0.059 0.025 (0.027) (0.023) (0.030) (0.023)
cons 0.223 0.192 0.228 0.171
(0.286) (0.313) (0.331) (0.273) cons
Hausman 1.33 1.25 3.20 2.32 (0.178) (0.317) (0.181) (0.304)
Wooldridge 0.211 0.256 0.171 0.158 Hausman 20.29*** 17.94*** 18.60*** 23.04***
Levene_Wo 1.685* 1.587 1.435 1.586 Wooldridge 7.381** 10.148*** 10.138*** 14.803***
Pesaran's CD 3.196*** 2.663*** 2.356** 3.634*** Modified Wald 1940.61*** 1329.53*** 2379.58*** 882.74***
Overall R2 0.380 0.603 0.595 0.615 Pesaran's CD -0.989 -0.466 -1.289 -0.697
Wald-statistic 57.94*** 2580.11*** 217.25*** 242.63*** Within R2 0.224 0.249 0.248 0.281
Obs. 132 132 132 132 F-statistic 539.71*** 43.98*** 38.19*** 161.72***
No of firms 12 12 12 12 Obs. 121 121 121 121
Estimator DK-RE DK-RE DK-RE DK-RE No of firms 11 11 11 11
Notes: Robust standard errors are reported in parentheses. DK-RE is the Estimator FE FE FE FE
Driscoll-Kraay standard errors estimator using REs regression. * p < 0.10, ** p Notes: Robust standard errors are reported in parentheses. FE is the Fixed
< 0.05, *** p < 0.01 Effects estimator. * p < 0.10, ** p < 0.05, *** p < 0.01

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Table 10. Estimation Results of the Driscoll-Kraay Standard Errors Table 11. Estimation Results of the Driscoll-Kraay Standard Errors
Estimator for Turkey Estimator for India
Dependent Variable: ROA Dependent Variable: ROA
(1) (2) (3) (4) (1) (2) (3) (4)
0.000** ARP
0.000
ARP (0.000)
(0.000)
0.000 0.000
IHP IHP
(0.000) (0.000)
0.000 0.000
APP APP
(0.000) (0.000)
0.000 -0.000
CCC CCC
(0.000) (0.000)
-0.002 -0.001 -0.001 -0.002 0.002 0.002 0.003 0.002
CR CR
(0.004) (0.004) (0.004) (0.004) (0.002) (0.002) (0.002) (0.002)
-0.201*** -0.204*** -0.202*** -0.199*** -0.114*** -0.113*** -0.115*** -0.113***
LEV LEV
(0.015) (0.017) (0.021) (0.017) (0.012) (0.011) (0.011) (0.011)
0.012 0.015 0.014 0.014* -0.011* -0.011* -0.010* -0.010*
SIZ SIZ
(0.007) (0.008) (0.008) (0.007) (0.005) (0.005) (0.005) (0.005)
0.036*** 0.040*** 0.039*** 0.043*** 0.053*** 0.053*** 0.054*** 0.053***
GRO GRO
(0.007) (0.009) (0.009) (0.009) (0.013) (0.014) (0.013) (0.014)
0.346** 0.421** 0.403** 0.390** 0.265** 0.263** 0.255** 0.255**
cons cons
(0.141) (0.162) (0.153) (0.139) (0.091) (0.097) (0.091) (0.096)
Hausman 20.29*** 17.94*** 18.60*** 23.04*** Hausman 49.73*** 44.63*** 53.13*** 42.72***
Wooldridge 0.533 1.401 0.847 1.894 Wooldridge 18.275*** 19.238*** 19.982*** 18.386***
Modified Wald 389.81*** 430.99*** 415.66*** 316.66*** Modified Wald 22789.76*** 22213.00*** 32944.60*** 22119.22***
Pesaran's CD -2.150** 5.902*** 5.489*** 5.936*** Pesaran's CD 20.370*** 20.431*** 21.110*** 20.229***
Within R2 0.409 0.400 0.399 0.405 Within R2 0.178 0.177 0.180 0.177
F-statistic 91.04*** 243.55*** 241.57*** 63.33*** F-statistic 219.35*** 1150.58*** 49.97*** 867.52***
Obs. 187 187 187 187 Obs. 1595 1595 1595 1595
No of firms 17 17 17 17 No of firms 145 145 145 145
Estimator DK-FE DK-FE DK-FE DK-FE Estimator DK-FE DK-FE DK-FE DK-FE
Notes: Robust standard errors are reported in parentheses. DK-FE is the Notes: Robust standard errors are reported in parentheses. DK-FE is the
Driscoll-Kraay standard errors estimator using FEs regression. * p < 0.10, ** p Driscoll-Kraay standard errors estimator using FEs regression. * p < 0.10, ** p
< 0.05, *** p < 0.01 < 0.05, *** p < 0.01.

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A. Toy, A. Kapusuzoğlu & N.B. Ceylan, “The Effect of Working Capital Management on the Performance of the Textile Firms: Evidence from Fragile Five Countries
(FFCs)”

Table 12. Estimation Results of the Driscoll-Kraay Standard Errors Table 13. Estimation Results of the Random Effects Estimator for
Estimator for Brazil Indonesia
Dependent Variable: TQ Dependent Variable: TQ
(1) (2) (3) (4) (1) (2) (3) (4)
0.001 -0.001**
ARP ARP
(0.002) (0.001)
0.001 -0.002**
IHP IHP
(0.002) (0.000)
0.004 0.004*
APP APP
(0.003) (0.002)
CCC
-0.001 0.002***
(0.001) CCC
(0.000)
-0.068** -0.071** -0.059 -0.060** -0.024 -0.022 -0.013 -0.021
CR CR
(0.023) (0.027) (0.050) (0.023) (0.036) (0.040) (0.040) (0.040)
-0.613*** -0.628*** -0.671** -0.624*** 1.315*** 1.411*** 1.211*** 1.321***
LEV LEV
(0.179) (0.152) (0.288) (0.143) (0.439) (0.426) (0.378) (0.388)
-0.667*** -0.671*** -0.568* -0.635*** -0.359** -0.419*** -0.347*** -0.377***
SIZ SIZ
(0.163) (0.179) (0.294) (0.188) (0.148) (0.160) (0.111) (0.145)
0.007 0.013 -0.007 0.000 -0.107 -0.149 -0.147 -0.171
GRO GRO
(0.073) (0.071) (0.170) (0.071) (0.135) (0.137) (0.150) (0.143)
14.95*** 15.03*** 12.86** 14.58*** 7.227*** 8.555*** 6.765*** 7.741***
cons cons
(3.169) (3.590) (5.750) (3.672) -1.248 -1.246 (0.890) -1.293
Hausman 12.09** 55.00*** 36.18*** 16.79*** Hausman 6.02 2.02 3.41 1.89
Wooldridge 20.327*** 23.408*** 18.661*** 21.579*** Wooldridge 39.105*** 34.488*** 42.628*** 32.891***
Modified Wald 1248.76*** 1626.72*** 1115.09*** 1806.70*** Levene_Wo 4.083*** 4.165*** 3.142*** 3.444***
Pesaran's CD 2.664*** 3.501*** 0.842 3.833*** Pesaran's CD -1.826* -1.697* -0.666 -1.383
Within R2 0.398 0.401 0.427 0.407 Overall R2 0.160 0.190 0.109 0.186
F-statistic 119.04*** 169.53*** 53.45*** 115.80*** Wald-statistic 22607.18*** 904.07*** 8394.09*** 4825.81***
Obs. 132 132 132 132 Obs. 121 121 121 121
No of firms 12 12 12 12 No of firms 11 11 11 11
Estimator DK-FE DK-FE DK-FE DK-FE Estimator RE RE RE RE
Notes: Robust standard errors are reported in parentheses. DK-FE is the Notes: Robust standard errors are reported in parentheses. RE is the Random
Driscoll-Kraay standard errors estimator using FEs regression. * p < 0.10, ** p Effects estimator. * p < 0.10, ** p < 0.05, *** p < 0.01
< 0.05, *** p < 0.01

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 Ekonomi, Politika & Finans Araştırmaları Dergisi, 2022, 7(4): 814-838
Journal of Research in Economics, Politics & Finance, 2022, 7(4): 814-838

Table 14. Estimation Results of the Driscoll-Kraay Standard Errors Table 15. Estimation Results of the Driscoll-Kraay Standard Errors
Estimator for Turkey Estimator for India
Dependent Variable: TQ Dependent Variable: TQ
(1) (2) (3) (4) (1) (2) (3) (4)
-0.001 0.001*
ARP ARP
(0.001) (0.000)
-0.001* 0.001***
IHP IHP
(0.001) (0.000)
0.004*** 0.000
APP APP
(0.001) (0.000)
-0.001** 0.001**
CCC CCC
(0.000) (0.000)
-0.012 -0.003 -0.004 -0.012 0.038*** 0.040*** 0.035*** 0.046***
CR CR
(0.025) (0.060) (0.060) (0.060) (0.008) (0.008) (0.008) (0.008)
1.211*** 0.287 0.348 0.343 0.789*** 0.776*** 0.755*** 0.767***
LEV LEV
(0.345) (0.226) (0.235) (0.224) (0.139) (0.137) (0.140) (0.130)
-0.347*** -0.405*** -0.350*** -0.377*** -0.138*** -0.124** -0.151*** -0.107**
SIZ SIZ
(0.046) (0.047) (0.047) (0.044) (0.042) (0.044) (0.046) (0.034)
-0.147 0.242 0.191 0.243 0.230*** 0.212*** 0.242*** 0.224***
GRO GRO
(0.132) (0.305) (0.298) (0.311) (0.056) (0.054) (0.060) (0.054)
6.765*** 9.196*** 8.260*** 8.676*** 3.185*** 2.978*** 3.367*** 2.699***
cons
(0.890) (0.908) (0.891) (0.819) cons
Hausman 22.26*** 19.97*** 17.80*** 19.55 (0.764) (0.781) (0.783) (0.635)
Wooldridge 7.459** 9.298*** 8.082** 7.711** Hausman 37.27*** 41.39*** 44.68*** 37.17***
Modified Wooldridge 36.896*** 36.845*** 36.973*** 36.758***
1443.65*** 2746.71*** 1659.29*** 2142.65***
Wald Modified Wald 86816.28*** 1.0e+05*** 1.1e+06*** 1.1e+05***
Pesaran's CD 13.713*** 13.594*** 14.075*** 12.819*** Pesaran's CD 88.852*** 90.291*** 86.976*** 89.106***
Within R2 0.500 0.508 0.499 0.506 Within R2 0.216 0.218 0.210 0.226
F-statistic 1658.25*** 566.16*** 159.10*** 68.67*** F-statistic 138.20*** 136.52*** 388.31*** 1521.97***
Obs. 187 187 187 187 Obs. 1595 1595 1595 1595
No of firms 17 17 17 17 No of firms 145 145 145 145
Estimator DK-FE DK-FE DK-FE DK-FE Estimator DK-FE DK-FE DK-FE DK-FE
Notes: Robust standard errors are reported in parentheses. DK-FE is the Notes: Robust standard errors are reported in parentheses. DK-FE is the
Driscoll-Kraay standard errors estimator using FEs regression. * p < 0.10, ** p Driscoll-Kraay standard errors estimator using FEs regression. * p < 0.10, ** p
< 0.05, *** p < 0.01 < 0.05, *** p < 0.01.

838