IMPACT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL DISTRESS AMIDST PANDEMIC: A MODERATED MODEL

Abstract

The global COVID-19 pandemic created major challenges for firms’ financial stability and emphasized the critical importance of effective working capital management (WCM). This study explores whether WCM impacted financial distress during the pandemic focusing on variables such as the cash conversion cycle (CCC), receivable collection period (RCP), payable deferral period (PDP), inventory conversion period (ICP) and net working capital (NWC). research specifically focus on 86 textile companies listed on the (PSX). The textile sector is a key non – financial industry that was significantly affected during the pandemic. This study uses panel data covering the period from 2018 -2022. The research revealed a clear and direct relationship between working capital components and financial distress during the Pandemic. The findings indicate that effective working capital with a reduction in financial distress. In addition, the analysis shows that the COVID-19 pandemic moderated the negative effects of inefficient WCM on financial stability. The research highlights the need for managers and policymakers to implement sound working capital strategies under uncertain economic conditions.