Authors: Panagiotis Dimitropoulos

Title: Working capital management and NPOs distress during austerity periods: The case of the Greek debt crisis

Abstract

Despite the importance of NPOs for the functioning of modern societies, their viability is often threatened by several shocks on the economy such as recessions, political unrests and even pandemics. During such periods efficient working capital management (WCM) can prove vital for NPOs to sustain their revenue base and control their expenses, even avoiding abruption of their activities and dissolution. The scope of this paper is to extend the existing literature on the viability of NPOs by considering the role of efficient WCM to their survivorship. The study employs a sample of 31 NPOs operating within the Greek territory over the period 2003-2018, when the Greek economy faced an unprecedent period of harsh austerity measures and economic recession. Empirical evidence documented that the larger the working capital, the smaller the distress probability of the NPOs. Also, NPOs with more cash, less receivable collection days and more payable days (larger cash conversion cycles) are associated with smaller distress probability. This impact is even more significant during the debt crisis period relative to the pre-crisis period.