Abstract

Purpose – The purpose of this paper is to analyze the impact of working capital management on profitability in industrial maintenance service companies.

Design/methodology/approach – Analytical modeling has been used as the research method. Finnish industrial maintenance companies have been analyzed on the basis of their financial statements.

Findings – We reveal a significant negative correlation between the cycle times of operational working capital and the return on investment of industrial maintenance companies. Light fixed assets and good profitability of the maintenance sector emphasize the importance of working capital management. Large maintenance service companies seem to achieve competitive advantage
over small and medium sized maintenance service providers through both fixed assets- and working capital-related economies of scale, and through the fact that large maintenance service providers often focus on providing services mostly for their host companies.

Research limitations – The scarcity of large enterprises in the market in question precludes the use of a more extensive sample in the analysis.

Practical implications – In the industrial maintenance service business, more attention should be paid to active management of working capital. We can conclude that this holds true especially in large industrial maintenance service enterprises.

Originality/value – We contribute to the unexplored perspective of industrial maintenance companies. Previous studies of industrial maintenance companies have not addressed working capital management, which gains more and more attention under the volatile economic circumstances of the present day.

Keywords - Industrial maintenance services, Profitability, Working capital, Flexible asset management model

Paper type - Research paper