Determinants of working capital management of firms in selected industries in Croatia

Considering the theoretical findings and the empirically determined relevance of working capital management (WCM), the paper focuses on identifying the WCM determinants of manufacturing, trade, and information and communication companies in Croatia. The time horizon of the analysis ranges from the year 2008 to the year 2015, and the final sample consists of 19,355 companies or 116,002 firm-year observations. In addition to the methods of descriptive statistics, the Kruskal-Wallis test, Dunn’s post hoc test, and panel regression analysis are used as methods of inferential statistics. The results of identifying the determinants of WCM indicate that WCM in the previous year, profitability, and financial constraints significantly positively impact working capital cycles, thus promoting conservative WCM. In contrast, size, growth, fixed investment, annual real GDP growth, and industry indicators were significantly negative predictors of the two WCM indicators used, the cash conversion cycle (CCC) and the net trade cycle (NTC). Accordingly, the latter stimulates aggressive WCM. Given the significantly positive effect of an aggressive WCM strategy on profitability, together with the results of the test of WCM determinants, it is recommended that the firms studied to use these determinants to generally manage net operating working capital in a narrower sense more aggressively and achieve its target values.