Effect of Working Capital Polices on Firm’s Performance

This research was carried out to examine the effect of working capital policies on the firm performance on the non-financial firms. This study was conducted in the Pakistan Stock Exchange. A sample of 120 non-financial firms were taken on basis of random sampling. The data of these non-financial firms were obtained during 2009 to 2014. The main purpose of the study was to assess the current assets and current liabilities level maintained by the non-financial firms and their effect on the profitability and firm value. ROA and firm value was taken as dependent variable while investment policy, financing policy, size, growth and leverage were taken as independent variables. For the data analysis, we used the panel data regression model. The diagnostic tests i.e. chow test, breush pagan, vector inflation factor and white's test for heteroskedasticity were used. The findings of chow test, Breush pagan test reflects for both ROA and firm value, the recommendation of fixed effect model for the data analysis. The result of fixed effect shows that investment policy, financing policy, size, growth and leverage have positive relationship with the profitability and firm value. The results show that the investment policies, financing policies and growth have a significant effect on the firm profitability while the leverage and size have insignificant effect on the firm profitability