Does it Pay to Be Efficient in Working Capital Management? Evidence from Finnish Smes During Covid-19

The aim of this study is to investigate the effect that firm level working capital strategy on accounts receivable had on working capital related financial difficulties during the Covid-19 pandemic in a sample of Finnish SMEs. We are able to identify the firms with Covid -19 induced financial difficulties with a unique loan application dataset from the Finnish government agency Finnvera. Our results indicate that firms with more aggressive working capital management strategies. i.e., shorter receivable and inventory cycles as well as longer cycles in payables, were more likely financially distressed during the covid-19 pandemic