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A Meta-Analysis of the Impact of Working Capital on Profitability

Samuel Tabot Enow

DOI: 10.15604/ejef.2022.10.01.001


Working capital and profitability are two important core concepts in financial management and accounting. The management of these two concepts can affect an investor’s decision to invest in a firm. Thus, there have been many publications stressing the need to effectively manage working capital because of its significant impact on profitability. However, working capital has been hardly mentioned by any senior manager or executive as one of the value drivers that enhances profitability. Therefore, the aim of this study is to investigate the strength and the extent to which profitability depends on working capital. This study is motivated by a lack of research in this area. Using a meta-analysis of 32 published journal articles and dissertations, the study finds that working capital accounts for 37.8% of the variability in profitability. Also, the results of a Kolmogorov-Smirnov test reveal that the distribution of the coefficient of determination is not normally distributed and is not a good fit to explain the effect of working capital on profitability, hence independent of each other. The implication of this study is that research entitled “the effect of working capital management on profitability” should be scrutinized before being accepted for publication.

Keywords: Working Capital, Kolmogorov-Smirnov Test, Profitability, Meta Analysis


Cointegration of Equity Markets in Three Country Groups of OECD Countries

Dosse Toulaboe

DOI: 10.15604/ejef.2022.10.01.002


This paper investigates the stock market integration in North America, the Eurozone, and other OECD countries. The main questions addressed include whether the stock markets in each of the three country groups are cointegrated and whether the relationships are stable over time. The linkages are modeled using different statistical tools, including correlation, cointegration, vector-error correction, and Granger causality tests. The results show that the correlation coefficients are noticeably higher for the two country groups that are members of a trade or currency zone (NAFTA and the Eurozone) compared to the other OECD countries. Considering full samples, the results from the cointegration tests point to no cointegration for NAFTA markets, while they are mixed in the case of the other two country groups. After controlling for structural breaks by estimating the models for different sub-periods, the verdicts from the two cointegration tests were unanimous as the results unveil evidence of cointegration in each sub-periods for each of the three country groups. The results support the hypothesis that financial markets in the OECD countries are cointegrated. They also confirm the existence of structural breaks, the dynamic nature of the long-run integration of equity markets, and the argument that markets exhibit time‐varying long-run interdependence.

Keywords: Cointegration, Stock Market Integration, NAFTA, Eurozone, OECD, Granger Causality


Eurasian Publications
(Esra Barakli)
Aksemsettin Mah. Kocasinan Cad.
Erenoglu Is Merkezi
Fatih – Istanbul, TURKEY
Email: [email protected]
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