A good name is better than riches: Family firms and working capital management

This study is conducted to identify the direction of the relationship between working capital management (WCM) and firm performance of the non-financial sector of Pakistan from 2009 till 2018. This has also looked at the effect of restricted access to loan on the WCM- Profitability relationship. The findings confirmed that restricted loan accessibility impacts the WCM-Profitability relationship. The comparative analysis demonstrated that financially constrained firms are mostly non-family firms that are new, growing, smaller in size, face high risk, maintain high liquidity and tangibility ratios than non-constrained firms. Further, the working capital levels of financially constraint firms is lower because of high operating expenses and greater capital rationing. Managers and scholars may use these findings for the administration of their working capital policies in order to avoid the financial cost and create more opportunities for financial accessibility which is further beneficial for making informed investment decisions, yielding higher profits that contribute towards sustainable growth.

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The influence of family board involvement on working capital management

Corporate Board role duties and composition ◽

10.22495/cbv17i3art4 ◽

2021 ◽

Vol 17 (3) ◽

pp. 42-60

Author(s):

Fabio Franzoi

Keyword(s):

Family Involvement ◽

Family Firms ◽

Family Management ◽

Service Firms ◽

Capital Management ◽

Working Capital ◽

Governance System ◽

Working Capital Management ◽

Cash Conversion Cycle ◽

The Impact

While research on long-term capital structures of family and non-family firms is well established, differences in current assets- and liabilities-management are largely under-researched. The aim of the study is to examine whether the type and degree of family involvement in the firm affect the efficiency of working capital management. Employing a partially hand-collected panel of 278 listed firms from 2000–2013 this paper analyzes the impact of family shareholders as owners, managers, and supervisors on working capital handling in Germany. The results show that primarily the share of family members in the executive board increases the length of the cash conversion cycle (CCC), particularly in smaller and non-service firms. Most notably, family management increases the inventory period (DIO). The higher average equity ratio of family firms suggests that family firms may face reduced financing pressure to address such inefficiencies in current assets and current liabilities management. Furthermore, family-managed firms may be less professional in their working capital management. The findings contribute to the literature by showing that in a country with a less investor-friendly corporate governance system, family influences on working capital management are primarily due to management presence, not plain shareholder influence. The results stress the need for researchers to consider the degree of family management involvement when analyzing the financial aspects of family firms.

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The effect of working capital management on profitability: a case of listed manufacturing firms in South Africa

Investment Management and Financial Innovations ◽

10.21511/imfi.14(2-2).2017.05 ◽

2017 ◽

Vol 14 (2) ◽

pp. 336-346 ◽

Cited By ~ 4

Author(s):

Jason Kasozi

Keyword(s):

Operational Efficiency ◽

Manufacturing Firms ◽

Capital Management ◽

Working Capital ◽

Working Capital Management ◽

Cash Conversion Cycle ◽

Long Run ◽

Regression Estimators ◽

Collection Period ◽

Better Than

Working capital management plays a pivotal role in enhancing the operational efficiency of firms and their ultimate profitability. Therefore, the purpose of this study was to examine the trends in working capital management and its impact on the financial performance of listed manufacturing firms on the Johannesburg Securities Exchange (JSE). A panel data methodology was used with different regression estimators to analyze this relationship based on an unbalanced panel of 69 manufacturing firms listed during the period 2007–2016. The findings revealed that the average collection period and the average payment period are negative and statistically significant for profitability, implying that firms which efficiently manage their accounts receivable and those that pay their creditors on time perform better than those that do not. Additionally, a positive statistically significant relationship between the number of days in inventory and profitability was supported suggesting that firms which stock-up and maintain their inventory levels suffer less from stock-outs and avoid challenges of securing financing when needed. This increases their operational efficiency and ensures profitability in the long run. It could not be ascertained whether a shorter or longer cash conversion cycle enhances firm profitability, since findings to support this premise were weak. However, it was observed that manufacturing firms are on average, carrying lot of debt in their capital structures. The present study contributes to existing literature by presenting one of the very recent findings on this topic while simultaneously testing the validity of recent local and international methodologies, in order to inform policy change.

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Pengaruh Manajemen Modal Kerja Terhadap Profitabilitas Dan Risiko

Liquidity ◽

10.32546/lq.v6i2.24 ◽

2017 ◽

Vol 6 (2) ◽

pp. 95-102

Author(s):

Sri Setia Ningsih

Keyword(s):

T Test ◽

Raw Material ◽

Risk Level ◽

Capital Management ◽

Working Capital ◽

Working Capital Management ◽

Trading Company ◽

Regression Correlation ◽

Descriptive Method

The purpose of this research is to know about working capital management applied, and its influence on profitability and risk. The research object is trading company moves in import & distribute chemical raw material. The research used analysis descriptive method, and the hypothesis was testing by simple linier regression, correlation, and determination. The result of the research shows that the effect of the implementation of working capital management on the change of the net working capital with tend to rise has a profitability level of 10.4% lower than the net working capital change with tend to go down of 46%, but instead on the risk level, the net working capital change with tend to rise has a risk level of 43.8% higher than the change in net working capital with tend to go down of 0.3%.Based on t test, the result shows that the net working capital change influence is not significant to profitability and risk.

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