The paper presents comprehensive evidence on the relationship between working capital management (WCM) and SMEs' performance by taking into consideration of the plausible effect of cash flow. The paper adopts a panel data regression analysis on a sample of 802 British quoted small and medium enterprises listed on the alternative investment market for the period from 2004 to 2013. The results of the study demonstrate the importance of cash flow on SMEs' WCM and performance. According to our findings, WCM has a significantly negative impact on SME performance. However, with the available cash flow, we find a significantly positive relationship. Additionally, our evidence revels that the cash flow constrained (non-constrained) SMEs are able to enhance their performance through decreased (increased) investment in WCM. Overall, the results demonstrate the importance of cash flow availability on SMEs' working capital needs. Our findings suggest that in an event of cash flow unavailability (availability) managers should strive to reduce (increase) the investment in working capital in order to the improve performance. This current study incorporates the relevance of cash flow in assessing the association between WCM and firm performance
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