The focus of working capital management in UK small firms

Carole Howorth*, Paul Westhead

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review


Working capital management routines of a large random sample of small companies in the UK are examined. Considerable variability in the take-up of 11 working capital management routines was detected. Principal components analysis and cluster analysis confirm the identification of four distinct 'types' of companies with regard to patterns of working capital management. The first three 'types' of companies focused upon cash management, stock or debtors routines respectively, whilst the fourth 'type' were less likely to take-up any working capital management routines. Influences on the amount and focus of working capital management are discussed. Multinomial logistic regression analysis suggests that the selected independent variables successfully discriminated between the four 'types' of companies. The results suggest that small companies focus only on areas of working capital management where they expect to improve marginal returns. The difficulties of establishing causality are highlighted and implications for academics, policy-makers and practitioners are reported.

Original languageEnglish
Pages (from-to)94-111
Number of pages18
JournalManagement Accounting Research
Issue number2
Publication statusPublished - 2003


  • Management accounting
  • Multinomial logistic regression
  • Small firms
  • Working capital management

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