The objective of the current study is to investigate the various factors determining the working capital requirements in Pakistani non-financial firms by taking into account different economic and financial variables relating to the business over a period of six years (2004–2009). The present study is anticipated to add to improve understanding the financial and non-financial firm related factors that form up working capital requirements of firms in the emerging markets like Pakistan.

This paper contributes the literature on the determinants of working capital management in non-financial firms in at least two ways. Firstly, it focuses on the Pakistani non-financial firms where only limited study has been conducted. Secondly, it confirms some of the findings of previous studies. For the purpose of sampling, only listed companies from Karachi Stock Exchange were selected. Here, the study will discuss about the data source, sample size and variables used in the study. Descriptive analysis, ANOVA, Correlation and Regression analysis will be applied on the panel data to see the relationship of different variables with Working Capital management.

The primary objective of this paper is to add toward a very important and often neglected part of financial management known as the Working Capital Management with reference to Pakistan. The study will see that what are the major factors those determine the Working Capital Requirements of Pakistani firms. This is achieved by developing a similar empirical model first used by Chiou and Cheng (2006) and the subsequent work of Nazir and Afza (2009).

Data used in this study were secondary data. All the Data except economic growth has been gathered from the publication of State Bank of Pakistan named as Balance Sheet Analysis of Joint Stock Companies listed on the Karachi Stock Exchange for the period of 2004–2009. This analysis is based on the published balance sheets of non-financial companies listed at Karachi Stock during 2009. For comparison purpose, the analysis of previous five years is also included in the publication which is ultimately very helpful for the users. The study used balanced panel data. This is used to calculate Working Capital Requirement, Operating Cycle, Operating Cash Flow, Return on Assets, Leverage and Growth.

More specifically, the key objectives are:

(i) To determine the factors influencing the working capital requirements for 385 Pakistani firms listed on Karachi Stock exchange.

(ii) To find out the relationships between working capital and different factors like size, leverage, economic growth, etc.

(iii) To draw conclusion about these determinants of working capital management requirements.