Abstract:
The significance of the research is to find out the relationship between working capital financing, and firm performance in distressed firms of Pakistan. Additionally, we included financial constraints in the relationship of working capital financing and firm performance. Data has been collected from balance sheet analysis issued from state bank of Pakistan of 185 non-financial firms of Pakistan listed in Pakistan stock exchange for the period 2010- 2017.Variables used for this study are working capital financing, Return on Assets, Tobin’s Q, Size, Financial Leverage, growth of firm, Tangibility of assets, Age of firm and Current Ratio. Generalized method moments (GMM model) is used to check robustness of results. The results of the findings show that inverted U-Shape relationship exists between WC financing and organizational performance. In accumulation, results likewise show that companies which are less financially constraint can get financing of short-term debt in greater proportion. This literature contributes to the limited existing research on the relationship between working capital financing, firm performance and financial constraints in distressed firms of Pakistan.
