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1. Introduction
Over the last 40 years, major theoretical developments have occurred in the areas of long-term investment and financial decision-making. Many of these new concepts and related techniques are now being employed successfully in industrial practice. In contrast, far less attention has been paid to the area of short-term finance, in particular that of working capital management (WCM). Such neglect might be acceptable because of working capital considerations of relatively little importance to the firm. Due to this reason, only peripheral research interest in studying WCM process has been shown in the literature. This may occur for several other reasons, first, because decisions dealing with working capital occur frequently, and they are routine in nature. Thus, their individual impact is insignificant. Second, unlike decisions related to capital investment, these routine decisions are reversible over time. However, due to significant decline of corporate performance during and after financial crisis of 2008, once again, interest of managers and researchers is attracted to WCM. Many research studies like Deloof (2003), Falope and Ajilore (2009) and Gill et al. (2010) have shown that WCM also affect the profitability of a firm to a great extent. Wang (2002) noted that aggressive liquidity management enhances operating performance and is usually associated with higher corporate values.
Researchers were curious about a literature review of the topic which gave basis for this paper. This paper studies literature published on WCM. There is no literature review of WCM published after Gentry (1988) and Viskari et al. (2011). Gentry (1988) presented his review in 1988, but the major publication activities on WCM occurred on and after the financial slow down of 2008, and Viskari et al. (2011) in their review used a small sample of 23 firms. Except these two studies, there is complete dearth of literature on WCM. The purpose of this study is to provide an extensive literature review on WCM. More specifically, the objectives of the study are to:
synthesize the existing literature on WCM;
arrange the publication in an orderly manner to enable easy and quick search;
classify WCM research articles according their approach and methodologies; and
explore the issues in WCM research and suggest a research agenda for future work.
In addition to the aforementioned objectives, we have...