Capital investment and working capital management as the saviors of firm performance amidst Covid-19 padamic? Evidence from the consumer goods and services industry in Vietnam

Abstract

This study examines the relationship between the efficiency of working capital management, capital expenditure, the Covid-19 pandemic, and firm performance within the consumer goods and services sector in Vietnam, spanning the years 2013 to 2022. The initial data set comprised 700 observations, representing 70 distinct companies. However, following data filtration, only 510 yearly observations (equivalent to 51 companies) remained for analysis. The data are extracted from the audited financial statements of consumer goods and services (CG&S) firms listed in Vietnam Stock Exchange. The study illustrates the response of the CG&S firms' performance will increase when enhanced capital expenditure and optimum use of working capital (by reducing the cash conversion cycle), especially when facing unexpected shocks such as Covid-19 pandemic. A novel factor in this study is that the Financial flexibility in capital exhibits a counterintuitive negative correlation with CG&S firms' performance, contrary to initial expectations. Based on the results obtained, the study contributes evidence and recommends that CG&S firms reduce their cash cycle, increase investment in capital expenditure, and enhance the short-term investment in working capital particularly during periods marked by the economic aftermath of the Covid-19 pandemic. The main findings of this study provided the moderating role of the capital management process in shaping firm performance, particularly in response to unforeseen external shocks