Working Capital Determinants and Profitability: Empirical Evidence from an Emergent Economy

This paper aims to investigate the relationship between working capital and profitability in the context of an emerging economy, such as the Chilean one. For this purpose, we analyzed data from a sample of manufacturing companies in the Santiago metropolitan region. The data concern the period 2016-2018 and were collected through the use of a questionnaire. To develop the research, we used the generalized least squares method, as it allows for more reliable results. The empirical results showed that the relationship between the single determinants of working capital and profitability is not linear, suggesting that, until the optimal size is reached, the relationship between working capital and profitability is positive. However, once the optimal size is exceeded, the relationship becomes negative.