Financial Flexibility and Profitability Resilience to the COVID-19 Shock: The Role of Working-Capital Management in Global FMCG Manufacturing Firms

Sammanfattning

Background: The COVID-19 pandemic created financial and operational disruption across global industries, particularly for FMCG manufacturing firms that rely heavily on inventory-intensive operating cycles and efficient working-capital management. Existing literature suggests that financial flexibility may have helped firms during the crisis. However, the evidence remains mixed, particularly regarding the role of working capital management within the FMCG manufacturing sector. Purpose: The purpose of this study is to examine whether pre-COVID financial flexibility is associated with profitability resilience among global FMCG manufacturing firms during and after the COVID-19 crisis. The study further investigates whether working-capital adjustments were a potential mechanism association with financial flexibility to resilience outcomes. Method: The study applies a quantitative research methodology using cross-sectional regression analysis based on firm-level financial data collected from Orbis database. The sample consists of up to 767 publicly listed FMCG manufacturing firms across Europe, Asia/Oceania, the Americas, and Africa. Financial flexibility is measured using pre-COVID cash holdings, leverage, and long-term debt structure, while profitability resilience is measured by changes in operating margin during the shock and recovery periods. Working Capital adjustment is captured through the cash conversion cycle. The analysis includes subsector and regional fixed effects, robust standard errors, and winsorized financial ratios. Conclusion: The findings provide limited empirical evidence that pre-crisis financial flexibility was associated with profitability resilience during and after the COVID-19 crisis among cross-sectional global FMCG manufacturing firms. Instead, operational characteristics such as firm size and pre-crisis operating revenue growth were more consistently associated with firms’ performance. In addition, working capital adjustment was heterogeneous across subsectors and regions, suggesting it is an context-specific operational response rather than a potential mechanism.