Abstract
This study examines the relationship between operating working capital (OWC) and firm profitability under conditions of economic instability, with particular attention to the moderating role of crisis periods. Anchored in the trade-off perspective and financial resilience literature, the analysis investigates whether the profitability implications of OWC intensify during periods of economic stress and whether this relationship varies across industry structures. Using a balanced panel of 25 firms listed on the Bucharest Stock Exchange across four sectors over the period 2013–2024 (300 firm-year observations), the study analyses the association between OWC, asset turnover (AT), firm size, and profitability measured by return on assets (ROA). The period 2020–2021 is treated as an exogenous crisis episode. Linear mixed-effects models are employed to capture firm-level heterogeneity and temporal variation in performance. The results indicate that the direct OWC–profitability association is negative across all specifications, but statistically significant only in the full model (p = 0.033) and not robust to more parsimonious specifications (p = 0.187), indicating that this effect should not be interpreted as uniformly strong in isolation. The interaction between OWC and the crisis period is negative and statistically significant: the total marginal effect of OWC on ROA intensifies from −0.065 in non-crisis periods to −0.165 during crisis conditions, equivalent to an additional profitability reduction of approximately 2.7 percentage points at the sample mean OWC. Industry group interactions do not reach statistical significance, a result attributable at least in part to the limited representation of project-based firms in the sample rather than definitive evidence of sectoral homogeneity. By contrast, asset turnover emerges as the dominant and robust profitability determinant across all specifications, with a standardized coefficient 2.7 times larger in magnitude than that of OWC. These findings indicate that the profitability implications of working capital are context-dependent, becoming economically meaningful primarily under macroeconomic stress, with relevant implications for financial management in emerging capital markets.
Cuvinte cheie
Operating working capital
Firm profitability
Crisis conditions
Financial resilience
Mixed-effects models
Istoric articol
Publicat
31.08.2026
Informații autori
Citare recomandată
Valerica Tătăranu (Soare), Elena Toader (Vasile) (2026). Operating Working Capital, Firm Profitability, and Crisis Moderation: Evidence From Listed Firms in an Emerging European Market. Constantin Brâncuși University of Târgu Jiu Economics Series, 2(1), 394–411. https://doi.org/10.65631/jes.4.2026.36
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