Liquidity Management and Firm Performance: The Roles of Working Capital and Cash Intensity in Indonesian Consumer Cyclicals Companies
Maintaining strong financial performance has become increasingly challenging for firms amid inflationary pressures, supply chain disruptions, and volatile consumer demand, making efficient liquidity management an important determinant of corporate profitability. This study examines the influence of Working Capital Management (WCM) and Cash Intensity Ratio (CIR) on corporate financial performance, with Firm Age included as a control variable, focusing on consumer cyclicals companies listed on the Indonesia Stock Exchange during the 2023–2024 period. A quantitative approach was employed using secondary data collected from annual financial statements. Purposive sampling produced a final sample of 145 companies, resulting in 290 balanced panel observations, which were analyzed using panel data regression under the Random Effect Model (REM), selected based on the Chow, Hausman, and Breusch–Pagan Lagrange Multiplier tests. The findings indicate that Working Capital Management has a positive and statistically significant effect on Return on Assets (ROA), suggesting that firms with stronger working capital positions tend to achieve higher profitability. In contrast, Cash Intensity Ratio and Firm Age do not exhibit statistically significant effects on financial performance. These results imply that profitability in the consumer cyclicals sector is influenced more by efficient working capital management than by the level of cash holdings or organizational maturity. The study contributes to the corporate finance literature by providing recent evidence from an emerging market and offers practical implications for managers in designing working capital policies that enhance operational efficiency and long-term profitability.