EMPIRICAL ANALYSIS OF THE EFFICIENCY OF WORKING CAPITAL MANAGEMENT AMONG HUNGARIAN FOOD INDUSTRY SMES

Peter BAGDACS

Institute of Accounting and Finance, Faculty of Economics and Business, University of Debrecen, Debrecen, Hungary

bagdacs.peter@gmail.com

Abstract: The Hungarian food industry is one of the strategically important sectors of the national economy, playing a vital role in maintaining food security, supporting employment, and contributing to overall economic performance and value creation. In recent years, firms operating in this sector have faced an increasingly complex and uncertain economic environment shaped by accelerating inflation, rising energy costs, tighter financing conditions, and persistent disruptions in supply chains. These challenges have placed particular pressure on small and medium-sized enterprises, whose financial flexibility, liquidity reserves, and adaptive capacity are typically more limited than those of large corporations. Under such circumstances, the efficiency of working capital management has become a matter of central importance, as it directly affects firms’ short-term solvency, operational stability, and profitability. The aim of this study is, on the one hand, to highlight the economic significance of the Hungarian food industry and, on the other hand, to examine empirically the relationship between working capital management efficiency and profitability among Hungarian food industry SMEs. The central research question is whether, and to what extent, the cash conversion cycle and its main components – inventory holding period, receivables collection period, and payables deferral period – affect firm profitability during the period between 2020 and 2024. The research adopts an empirical and quantitative approach, drawing on multi-year panel data to analyse the financial and operational characteristics of Hungarian food industry SMEs. The relevance of the study lies in the fact that the international literature has produced mixed findings regarding the relationship between working capital management and profitability, while longitudinal empirical evidence focusing specifically on Hungarian food industry enterprises remains limited. The expected findings of the study may contribute to a more nuanced understanding of the financial implications of working capital management and may offer valuable insights for corporate decision-makers, researchers, and economic policy actors alike, particularly in supporting decisions aimed at improving liquidity management, strengthening competitiveness, and enhancing financial stability.

Keywords: working capital management; cash conversion cycle; profitability; Hungarian food industry SMEs.

JEL Classification: G12; G15; G32.

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