GLOBAL FINANCIAL CRISIS, WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF NONFINANCIAL FIRMS LISTED ON THE JOHANNESBURG STOCK EXCHANGE, SOUTH AFRICA

Panel data regression was used to analyse the effect of the 2008/2009 global financial crisis on the nexus between working capital management and its separate components (inventory conversion period (ICP), receivables conversion period (RCP) and payables deferral period (PDP)) and profitability of a sample of 75 non-financial firms listed on the JSE over the 10-year period, 2003 to 2012. The results show a significant negative relationship between RCP and profitability during the financial crisis only. Second, during the crisis period, the relationships between profitability and both cash conversion cycle and ICP, and also between profitability and PDP are negative and positive respectively; however, the relationships are insignificant. On the basis of the above findings this study recommends that corporate managers must adopt efficient working capital management policies during non-crisis periods in order to withstand liquidity constraints in the likely event of a sudden economic downturn