Navigating liquidity in turbulent waters: The impact of global supply chain pressures on maritime working capital management strategies

Abstract

This study investigates the relationship between working capital management (WCM) and firm profitability using the Generalized Method of Moments (GMM) applied to a dynamic panel dataset of 189 internationally listed maritime transport firms spanning the period from 2000 to 2022. In addition, the analysis explores the moderating role of global supply chain pressures (GSCP), alongside firm-specific and macroeconomic variables, in shaping the WCM–profitability nexus. The findings show that shipping firms tend to adopt aggressive WCM strategies, particularly in response to firm-level characteristics and global economic conditions. Importantly, the results differ from previous research by showing a U-shaped link between working capital investment and firm performance, suggesting an optimal WCM level that boosts profitability. While WCM negatively affected return on assets (ROA) during the global financial crisis and a China-US trade war, it had a positive impact during and following the COVID-19 pandemic, highlighting the strategic importance of internal liquidity management in times of crisis. Furthermore, firms significantly increased their working capital allocation amid elevated supply chain pressures, with the relationship between the cash conversion cycle (CCC), GSCP, and profitability also exhibiting an inverted U-shaped pattern. These findings underscore the need for government agencies and policymakers to strengthen corporate liquidity frameworks, promote efficient WCM practices, and enhance firms’ responsiveness to monetary policy amidst intensifying global supply chain disruptions.