Determinants of working capital management in small and medium enterprises: Evidence from Central and Eastern Europe

The main purpose of the paper is to identify the determinants of working capital management in the SME sector at the company, industry and country levels. The research is based on the statistical analysis of the financial data of 8,516 SMEs from Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Slovakia in the years 2012-2020. The influence of firm-specific factors on variables describing working capital management has been identified: company size exerts a positive impact, while company growth, tangibility, leverage, and cash flow have a negative effect. In terms of the influence of industry-specific factors, the average values characterising working capital management in a given industry have a positive impact. Finally, regarding country-specific factors, the positive effects of the GDP growth and unemployment level have also been confirmed. The study contributes to the literature by providing strong evidence of (i) firms in an industry using similar working capital management policies and (ii) industry-specific factors being more influential than country-specific (mainly macroeconomic) determinants of working capital management. In this regard, the study highlights new industry- and country-specific factors and also confirms the influence of previously known determinants at the firm level.