Sharīʿah compliant working capital financing_ a case-study of Indian sugar industry

2020 ◽  
Vol 11 (3) ◽  
pp. 674-693
Author(s):  
Abuzar Nomani ◽  
Mohammad Khalid Azam
Keyword(s):  
Sugar Industry ◽  
Panel Data Analysis ◽  
Capital Requirements ◽  
Raw Material ◽  
Islamic Banking ◽  
Working Capital ◽  
Content Type ◽  
Agriculture Sector ◽  
Capital Financing ◽  
Sugar Mills

Purpose This paper aims to assess how Sharīʿah guidelines improve the working capital needs of the Indian sugar industry. Previous studies reveal that the sugar industry in India is in a state of cash deprivation for decades. Finance is not available for expansion, as well as for working capital requirements. Banks have also declined to provide working capital loans to the sugar industry. Design/methodology/approach Lack of working capital management and its impact upon sugar mills profitability are examined based on a sample of six Indian sugar mills and the use of panel data analysis for the period 2011-2015. Findings The regression results suggest the need for reducing the number of days’ account receivables and inventories to a reasonable minimum to maintain the liquidity necessary for the mills, which current mills cannot manage to achieve, and consequently, suffer liquidity problems. Practical implications This paper presents a model of Sharīʿah-compliant working capital financing for cash deprived Indian sugar industry. All the three parties stand to benefit from this arrangement: the farmer will get the price of his crop promptly and at its farmland, sugar mill will secure the required quantity of raw material (sugarcane) without any immediate cash outflow, and the Islamic bank will earn a reasonable mark-up profit from this transaction. Originality/value The study is the first comprehensive effort to explore the possible combination of Islamic banking products subject to the fulfillment of needs of sugar mills and farmers and the application of an Islamic banking instrument in the agriculture sector of India. It also suggests the possible models for financing under a Salam and Murabahah contract.

NoKalb Genetics (Pakistan) Limited: Supply Chain Management

2003 ◽  
Vol 07 (01) ◽  
pp. 43-66
Author(s):  
Arif Iqbal Rana
Keyword(s):  
Supply Chain ◽  
Supply Chain Management ◽  
Capital Requirements ◽  
Raw Material ◽  
Working Capital ◽  
Chain Management ◽  
Retail Outlets ◽  
Hybrid Seeds ◽  
Limited Supply ◽  
A Chain

This case is about the Supply Chain of a pesticides producer (disguised as a hybrid seeds producer) that imported the raw material for its pesticides from its mother company in Switzerland, formulated and packed it in Karachi, and sold it throughout Pakistan. The company had two large warehouses in the country, many regional ware-houses, and a chain of retail outlets throughout the country. The company had been steadily losing market share to cheaper "generics" in the last 15 years. The company had also changed hands a few times in the last ten years and had been under pressure to reduce working capital requirements. The case looks at the typical challenges in supply chain management.

DOMAINS AND MOTIVES OF MUSHARAKAH SPUR IN THE ISLAMIC BANKING INDUSTRY OF PAKISTAN

2019 ◽  
pp. 1-29 ◽  
Author(s):  
MUHAMMAD NOUMAN ◽  
KARIM ULLAH ◽  
SHAFIULLAH JAN
Keyword(s):  
Banking Industry ◽  
High Volume ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Working Capital ◽  
Government Interventions ◽  
Five Factors ◽  
Capital Financing ◽  
Consistent Tendency ◽  
The Ideal

Participatory financing schemes, including Musharakah and Mudarabah, are theoretically claimed to be the ideal modes of Islamic financing, but their practice is restrained by several factors. That is why Islamic banks have a consistent tendency to avoid participatory financing on the assets side throughout the world. However, recently this trend has started changing in Pakistan and Indonesia where the share of participatory finance has raised significantly in the financing portfolio of Islamic banks. The present paper explores this recent spur of participatory finance in Pakistan in terms of its domains of applications and the responsible factors. The findings lead to a novel posteriori framework which shows that the shift towards participatory financing is primarily characterized by increase in working capital financing and commodity operations financing through Musharakah mode Islamic banks. Moreover, five factors contribute to the spur of participatory financing including: (i) introducing varieties in Musharakah, (ii) enhanced applicability, (iii) high volume projects, (iv) government interventions, and (v) regulator’s role. The framework can significantly advance understanding with respect to the implementation theory of participation financing within Islamic banking and related Shariah compliance and regulation.

Working capital financing and corporate profitability of Indian manufacturing firms

2018 ◽  
Vol 56 (2) ◽  
pp. 441-457 ◽  
Author(s):  
Ajaya Kumar Panda ◽  
Swagatika Nanda
Keyword(s):  
Linear Relationship ◽  
Capital Requirement ◽  
Working Capital ◽  
Short Term ◽  
Financial Flexibility ◽  
Content Type ◽  
Indian Economy ◽  
Manufacturing Sectors ◽  
Non Linear ◽  
Capital Financing

Purpose The purpose of this paper is to provide empirical evidence about the relationship between working capital financing (WCF) and firm profitability in six key manufacturing sectors of Indian Economy. It also aims to capture the change in the financing of working capital requirement over different scenarios of price-cost margin and financial flexibility. Design/methodology/approach The study is undertaken on a sample of 1,211 firms from 6 key manufacturing sectors of Indian economy from 2000 to 2016. The non-linear relationship between WCF and profitability is studied using two-step generalized model of moments (GMM) estimator. Findings The study finds a convex relationship between WCF and profitability among firms in chemical, construction, and consumer goods sectors. Firms in these sectors can finance larger portion of their working capital requirements through short-term debt without negatively impacting profitability. However, a concave pattern of relationship for firms in machinery, metal, and textile industries implies increasing debt financing of working capital requirement would increase profitability for the firms who have financed lower portion of their working capital by short-term bank borrowing. But when a higher proportion of working capital requirements are already financed by short-term debt, a further increase in debt financing may impact profitability negatively. Moreover, the study finds that firms with high financial flexibility and high price-cost margin (except textile) can increase profitability by financing larger portion of working capital requirement through short-term debts and the continuation with risky WCF could increase profitability. Originality/value The study contributes to the literature on working capital in a number of ways. First, no previous study has been undertaken to explore the non-linear relationship between WCF and corporate profitability over a large sample of firms from six key manufacturing sectors of Indian economy. Second, the study uses a quadratic function to explore the non-linear relationship between WCF and profitability. Third, the study explores the relationship between WCF and profitability with respect to the price-cost margin and financial flexibility of firms under different manufacturing sectors of Indian economy. Finally, the study uses advanced two-step GMM, the panel data techniques to handle unobservable heterogeneity and issues of endogeneity within the data sample.

Determinants of working capital behavior: evidence from Egypt

2019 ◽  
Vol 15 (1) ◽  
pp. 39-61 ◽  
Author(s):  
Amr Ahmed Moussa
Keyword(s):  
Firm Value ◽  
Emerging Market ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Economic Conditions ◽  
Working Capital ◽  
Content Type ◽  
Cash Conversion Cycle ◽  
Industry Type ◽  
The Impact

Purpose The purpose of this paper is to empirically analyze and identify key factors affecting working capital behavior of companies listed on the Egyptian Stock Exchange. Design/methodology/approach Working capital requirement and cash conversion cycle were used to proxy working capital behavior. The study explored nine main factors widely discussed in previous research to explain working capital behavior: operating cash flow, growth opportunities, performance, firm value, age, size, leverage, economic conditions and industry type. The study employed a panel data analysis for 68 listed Egyptian industrial firms for the period 2000–2010. Different techniques of the generalized method of moments were used to test the validity of the research hypotheses. Findings The results show that working capital behavior is affected by various factors related to firm characteristics, economic conditions and industry type. Originality/value This study provides financial managers with a better understanding of the impact of different internal and macroeconomic factors on working capital behavior in an emerging market, such as Egypt’s.

Working capital management, board structure and Tobin's q ratio of Thai listed firms

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nongnit Chancharat ◽  
Chamaiporn Kumpamool
Keyword(s):  
Board Of Directors ◽  
Capital Investment ◽  
Generalized Method Of Moments ◽  
Board Structure ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
Listed Firms ◽  
Capital Financing

PurposeThis study investigates whether the integration between working capital management (WCM) and the structure of a firm's board of directors impacts its Tobin's q ratio. The sample set consists of 319 Thai listed firms with 3,190 firm-year observations from 2010 to 2019.Design/methodology/approachThe two-step generalized method of moments (two-step GMM) model is employed to address endogeneity.FindingsThe empirical results show that having both (1) a high level of net working capital holdings, a long period of net trade cycles or using an aggressive policy in working capital investment and (2) a more diverse board of directors decrease a firm's Tobin's q ratio. Conversely, when a firm's managers employ an aggressive policy for their working capital financing and the board structure of their firms is highly diverse, the firm's Tobin's q ratio increases. This indicates the appropriateness of some WCM policies is dependent on the characteristics of a firm's board of directors. Thus, the different integration between WCM and board structure may elicit dissimilar outcomes for a firm's Tobin's q ratio.Originality/valueTo their knowledge, the authors are the first to investigate the influence of the integration between WCM and board characteristics on Tobin's q ratio.

scholarly journals The extent of audit report lag and governance mechanisms

2020 ◽  
Vol 11 (1) ◽  
pp. 70-89
Author(s):  
Mohamed Ahmed Kaaroud ◽  
Noraini Mohd Ariffin ◽  
Maslina Ahmad
Keyword(s):  
Fixed Effects ◽  
Audit Committee ◽  
Panel Data Analysis ◽  
Control Variable ◽  
Islamic Banking ◽  
Audit Report ◽  
Governance Mechanisms ◽  
Financial Reports ◽  
Content Type ◽  
Banking Institutions

Purpose The purpose of this study is to examine the extent of audit report lag and its association with governance mechanisms in the Islamic banking institutions in Malaysia. Design/methodology/approach The extent of audit report lag is defined by the number of days from a company’s financial year-end to the signature date on its audit report. The sample of the study comprises 112 observations of Islamic banking institutions’ financial reports for the period 2008-2014. A balanced panel data analysis is performed to analyse the association between the extent of audit report lag and governance mechanisms. Findings The findings show that the extent of audit report lag for the sample selected ranges from a minimum period of 7 days to a maximum period of 161 days, and the extent of audit report lag is approximately two months on average. A fixed effects analysis indicates that audit committee expertise and audit committee meeting have significant association with the extent of audit report lag. On the other hand, board independence, audit committee size and Shari’ah board expertise have insignificant association with the extent of audit report lag. In addition, one control variable (Islamic bank size) is found to be significantly associated with longer audit report lag. Practical implications The findings provide useful feedback for Malaysian policymakers on the past and current practices of financial reports and of governance mechanisms. The findings of the study would help the policymakers in monitoring the Islamic banking institutions’ compliance with financial reports submission requirements. The policymakers perhaps could relook into governance mechanisms that reduce the extent of audit report lag in the Islamic banking institutions and implement regulations to strengthen them. Originality/value Unlike the majority of prior studies that investigated the association between the extent of audit report lag and governance mechanisms, this study provides two contributions. First, to the authors’ knowledge, this study is the first piece of research that examined the association between governance mechanisms and the extent of audit report lag in Islamic banking institutions. Second, the study examined the association of new governance variable, namely, Shari’ah committee expertise which has not been previously examined in the literature of audit report lag.

Working capital requirements of manufacturing SMEs: evidence from emerging economy

2017 ◽  
Vol 27 (3) ◽  
pp. 369-385 ◽  
Author(s):  
Harsh Pratap Singh ◽  
Satish Kumar
Keyword(s):  
Cash Flow ◽  
Random Effect ◽  
Cash Flows ◽  
Capital Requirements ◽  
External Factors ◽  
Sales Growth ◽  
Working Capital ◽  
Financial Leverage ◽  
Content Type ◽  
Operating Cash Flow

Purpose The purpose of this paper is to analyze the effects of various factors like profitability, growth opportunity, financial leverage, assets tangibility, operating cash flows, age and size of firm on working capital requirements (WCR) of manufacturing SMEs in India. Design/methodology/approach The paper uses a panel data regression model with fixed and random effect estimations. The data utilized in this study includes financial data of 254 manufacturing SMEs operating in India for the period 2010 to 2014. Findings The overall results of the study indicate that operating cash flow, financial leverage, profitability, sales growth and asset tangibility are the key drivers of WCR for Indian manufacturing SMEs. Profitability of firm and sales growth are found to be positively related to WCR. In contrast, asset tangibility, operating cash flow and financial leverage are found to be negatively related to WCR. Research limitations/implications This paper investigates firm-specific factors while ignoring external factors like GDP growth, business indicators and industry type. Further research can be done to assess the effect of these external factors on WCR. Originality/value This research contributes to the working capital literature by providing empirical evidence on determining factors of WCR in manufacturing SMEs.

Defined strategies for financial working capital management

2016 ◽  
Vol 12 (3) ◽  
pp. 277-294 ◽  
Author(s):  
Anna-Maria Talonpoika ◽  
Timo Kärri ◽  
Miia Pirttilä ◽  
Sari Monto
Keyword(s):  
Stock Exchange ◽  
Qualitative Comparative Analysis ◽  
Capital Intensity ◽  
Capital Requirements ◽  
Previous Literature ◽  
Future Research ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type

Purpose – The purpose of this paper is to develop strategies for financial working capital management and to present previous literature on financial working capital management and its measures. Design/methodology/approach – Qualitative comparative analysis is used to formulate the strategies, and the variables in the analysis have been selected from previous literature. Empirical data consists of 91 companies listed in the Helsinki Stock Exchange during 2008-2012. Findings – The results indicate 11 possible strategies for financial working capital management which all aim at increasing financial working capital. There are suitable strategies for all companies independent from their profitability, capital intensity or working capital requirements. Research limitations/implications – The presented strategies have been created theoretically and have not been tested in companies, which could be done in future research. Originality/value – This study has three contributions. First, previous literature on financial working capital management is reviewed. Second, a novel measure for financial working capital is developed. Third, strategies for financial working capital management are presented.

Total-factor energy efficiency in China’s sugar manufacturing industry

2015 ◽  
Vol 7 (3) ◽  
pp. 360-373 ◽  
Author(s):  
Lei Ru ◽  
Wei Si
Keyword(s):  
Energy Efficiency ◽  
Manufacturing Industry ◽  
Sugar Industry ◽  
Probit Model ◽  
Firm Level ◽  
Data Set ◽  
Total Recovery ◽  
Content Type ◽  
Fractional Probit ◽  
Sugar Mills

Purpose – The purpose of this paper is to evaluate the total-factor energy efficiency (TFEE) in China’s sugar manufacturing industry using firm-level data from 2002/2003 to 2012/2013 crushing seasons, and further explore the determinants of TFEE. Design/methodology/approach – Modified data envelopment analysis is used to measure the TFEE of each sugar mill during the crushing seasons. Then heteroskedastic fractional probit model is applied to estimate the determinants of TFEE because of the bounded nature of TFEE and heteroskedasticity of unbalanced panel. Findings – The results show that throughout the crushing seasons, the average TFEE is 0.57; there are spatial differences of TFEE in Guangxi sugar industry, highest in southern area; the TFEE of foreign-owned sugar mills is larger than that of private-owned and state-owned sugar mills; the larger the enterprise size, the higher the TFEE; private ownership, large size, raw material, safe productivity, total recovery rate as well as technical progress can improve TFEE significantly. Originality/value – This paper analyzes TFEE using a rich data set at firm level, allowing the existence of firm heterogeneity, as well as being complementary to the study of energy efficiency in China’s sugar industry. Moreover, ownership structure is involved in the determinants of TFEE, which is rarely done in literature. Lastly, heteroskedastic fractional probit model is employed to recognize the bounded nature of TFEE as well as selection bias of unbalanced panel to study the determinants of TFEE.

scholarly journals Analisis Pengaruh Pertumbuhan Pembiayaan Modal Kerja, Investasi dan Konsumsi Pada Perbankan Umum Syariah Terhadap Pertumbuhan Produk Domestik Regional Bruto (PDRB) Kalimantan Barat Periode 2009-2013

2016 ◽  
Vol 5 (1) ◽  
pp. 54
Author(s):  
Hayet Hayet
Keyword(s):  
Linear Regression ◽  
Capital Investment ◽  
Commercial Banking ◽  
Coefficient Of Determination ◽  
Islamic Banking ◽  
Working Capital ◽  
Significance Level ◽  
West Kalimantan ◽  
Capital Financing ◽  
Positive Effect

Islamic banking has an important role in stimulating the economy because of the intermediaryfunction performed. Improved economy is reflected in the value of the Gross Regional DomesticProduct (GRDP) of an area / region. Distribution of funding performed Islamic banking is givenbased on the purpose and use of the funds are classified into financing for working capital,investment and consumption. This research was to determine (1) the effect of the growth ofworking capital financing (MK), investment (I), and consumption in Islamic commercial bankingon growth GRDP West Kalimantan. (2) Determine which variables are the most dominantinfluence on GRDP growth in West Kalimantan. Sources of data working capital financing,investment and consumption of Islamic banking statistics obtained from Bank Indonesia whilethe GRDP data from the Central Statistics Agency (BPS) of West Kalimantan. The analyticalmethods used were multiple linear regression with a significance level of 0.05. The results of thisresearch indicate that (1) the growth of working capital financing, investment and consumptionin Islamic commercial banking simultaneously the effect on the GRDP growth in WestKalimantan. Partially, on the financing of investment and consumption variables there aresignificant positive effect on GRDP growth West Kalimantan. However, variable financing forworking capital of individual negative and not significant. 2) The most dominant variable effecton the GRDP growth is financing consumption, followed by financing investment and workingcapital. The value of the coefficient of determination Adjusted R2 of 0.489, it means that thefinancing of working capital, investment, and consumption of Islamic commercial banking affectGRDP growth of 48.9 percent. While the rest influenced by other variables not included in thisstudy.

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