Working Capital Management and Financial Performance During COVID-19 Pandemic: Evidence from Mexican Companies

The objective of this work is to analyze the WCM policies adopted during the COVID-19 pandemic and the impact on the financial performance of 25 companies from the Price and Quotation Index of the Mexican Stock Exchange. Secondary data from July 2020 to June 2021 is considered for the analysis of panel data with fixed effects models. Results suggest that during the pandemic Mexican companies adopted an aggressive WCM position based on the prolongation of payment to suppliers in relation to inventory levels and credit terms for clients. In addition, a negative and significant relationship is identified between days of accounts receivables and financial performance, suggesting that the optimization of credit policies is necessary to remain competitive during this crisis period. However, a non-significant relationship is found between overall WCM policies measured by the Cash Conversion Cycle and financial performance measured by Return on Assets during the period of analysis.