AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 201 – Business

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AAWE Working Paper No. 201 – Business

Working Capital Management and Profitability of Wine Firms in France: An Empirical Analysis

Beysül Aytac, Thi Hong Van Hoang, Amine Lahiani & Laure Michel


This study investigates the impact of working capital management (WCM) on firm profitability in the French wine industry. Based on annual data of 430 wine-producing firms from 2003 to 2014, we estimated the impact of the cash conversion cycle (CCC) and its components (days inventory, receivable and payable) on the return on assets. Other firm factors, such as size, growth, tangibility and leverage, were used for control. We took into account nonlinearity, unobservable heterogeneity, heteroscedasticity and endogeneity through the two-step GMM estimation method and showed that WCM did not have a significant impact on the profitability of French wine firms. Furthermore, we found no optimal level of CCC that would allow the firms to maximize their profitability. Only days account receivable and payable significantly and negatively impacted profitability. These results differ from those of previous studies and suggest that French wine firms should shorten the time both to collect cash from sales and pay providers. Contrarily to what we believe, the delay in converting inventories to cash does not significantly impact profitability. The managerial implications of these results were further explored by interviewing three wine firms in the south of France.

JEL classification: G32

This article was written by Karl Storchmann