Do working capital management practices influence investment and financing patterns of firms? Ahsan Akbar International Business School, Guangzhou College of South China University of Technology, Guangzhou, China Xinfeng Jiang College of Economics and Management, Huazhong Agricultural University, Wuhan, China, and Minhas Akbar Department of Management Sciences, COMSATS University Islamabad, Sahiwal Campus, Sahiwal, Pakistan Abstract Purpose – The present study aims to investigate the impact of working capital management (WCM) practices on the investment and financing patterns of listed nonfinancial companies in Pakistan for a span of 10 years. Design/methodology/approach – The study is based on secondary financial data of 354 listed nonfinancial Pakistani firms during the period of 2005–2014. The two-step generalized method of moment (GMM) regression estimation technique is employed to ensure the robustness of results. Findings – Empirical testing reveals that: excessive funds tied up in working capital have a negative impact on the investment portfolio of sample firms. Besides, a negative relationship between change in fixed assets and excess net working capital posits that, eventually, firms use idle resources tied up in short-lived assets to boost their investment activities. Furthermore, larger working capital levels were associated with higher leverage ratio which indicates that firms with inefficient WCM policies have to rely heavily on long-term debt to meet their short-term financing requirements. Additional results indicate that firms that take more time to sell inventory and convert receivables to cash, make more use of debt. Results of cash management models illustrate that cash-rich firms have lower leverage levels which signal the strong financial health and internal revenue generation capability of such firms. Originality/value – There is a dearth of empirical studies that examine the implications of WCM decisions on a firm’s capital structure. Besides, these studies are only confined to how a WCM policy influences the long- term investment activities of a firm. The research contributes to the extant literature by empirically revealing a link between the WCM practices and the firm’s long-range investment and financing patterns. Hence, financial managers shall account for the impact of their short-term financial management decisions on the capital structure of the firm. Keywords Working capital management, GMM, Investment and financing patterns, Nonfinancial firms, Pakistan Paper type Research paper 1. Introduction The aftermath of US financial crisis and the liquidity crunch that followed, invigorated the attention of financial managers to concentrate on the short-term financial health of firms. Nowadays, besides capital budgeting, and capital structure decisions, management of working capital is also an essential area in corporate finance literature. Efficient working capital management (WCM) reflects “the policies, adjustments, and management of the level of short-lived assets and liabilities of the firm in such a way that maturing obligations are timely met, and the fixed assets are adequately serviced” (Osisioma, 1997). In line with this description, the quantity of each component of working capital should be managed Working capital management practices The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/1026-4116.htm Received 11 July 2019 Revised 23 April 2020 2 September 2020 25 October 2020 Accepted 22 November 2020 Journal of Economic and Administrative Sciences © Emerald Publishing Limited 1026-4116 DOI 10.1108/JEAS-07-2019-0074