SME liquidity and its determinants

• Main Authors: Sabki, Sharmilawati, Wong, Woei Chyuan, Regupathi, Angappan
• Format: Article
• Language: English
• Published: Universiti Malaysia Sarawak 2019
• Subjects: HD28 Management. Industrial Management
• Online Access: http://repo.uum.edu.my/27477/1/IJBS%2020%201%20111%20124.pdf; http://repo.uum.edu.my/27477/; http://www.ijbs.unimas.my/index.php/content-abstract/current-issue/553-sme-liquidity-and-its-determinants

This paper examines the determinants of 250 Malaysian SMEs’ liquidity position (measured by cash conversion cycle-CCC) during the period 2005 to 2013. Fixed effect regression results indicate that the SMEs with high cash holdings tend to have lower CCC. Furthermore, this study also finds that the SMEs with access to bank loan financing have lower CCC. We argue that the accessibility to the bank loans facilities could serve as quality certification leading to longer payable period granted by the suppliers, hence, shorter CCC. This study adds to the existing literature on the factors that influence working capital management, thereby providing relevant information that may help the companies in working capital management. On the practical side, it also provides inputs to policymakers in formulating policies for the development of Malaysian SMEs.