Working capital determinants in the automotive industry: an empirical analysis

High-growth opportunities in the automotive industry make financial policies very important to firms operating in this sector because they need a huge amount of liquidity to undertake new investments, especially during the current transition towards electric vehicles. Working capital has a key role in corporate financial policies. In particular, it can both sustain transactions in the supply chain and provide automotive firms with the resources to fund their growth projects and face market competition. This paper studies the determinants of two key components of working capital, trade credit and trade debt, using an international sample of 8,471 automotive companies over the 2011-2019 period. The findings allow managers to understand the antecedents of working capital decisions and have important practical implications for the corporate strategies of automotive firms.