Corporate Governance and Working Capital Management — Inclusive Approach for Measuring the Firm Performance

2021 ◽  
pp. 2150015
Author(s):  
Umar Nawaz Kayani ◽  
Tracy-Anne De Silva ◽  
Christopher Gan
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Global Financial Crisis ◽  
Generalized Method Of Moments ◽  
Least Squares Regression ◽  
Capital Management ◽  
Working Capital ◽  
Collective Effect ◽  
Working Capital Management ◽  
Individual Basis

The least effective working capital management and poor corporate governance resulted in the 2008 global financial crisis besides various other factors as highlighted by the prior studies. So far, the existing literature reveals that WCM and CG affect firm performance (FP) on an individual basis. However, the collective effect of working capital management and corporate governance on firm performance has been paid the least attention. This study investigates the collective effect of working capital management and corporate governance on firm performance for Australia and Hong Kong markets, being the top two markets in the Pacific region. For this purpose, a system generalized method of moments based on two steps is applied to address the endogeneity issue. The results establish that working capital management and corporate governance affect firm performance on an individual basis and then these individual effect results compliment the collective effect results. The limitation of the study is that it did not consider two stages of Least Squares Regression due to difficulty in the identification of instrumental variables for both explanatory variables. As a policy implication, firm manager may take the benefit of the findings of this study while devising financial policies to enhance firm performance. Future investors may use the findings of this study to make an informed decision on future investment in both markets.

scholarly journals Global Financial Crisis, Working Capital Management, and Firm Performance: Evidence From an Islamic Market Index

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110157
Author(s):  
Minhas Akbar ◽  
Ahsan Akbar ◽  
Muhammad Umar Draz
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Generalized Method Of Moments ◽  
Market Performance ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Market Index ◽  
The Impact

This research investigates the impact of working capital management (WCM) on the profitability and market performance of firms that constitute an Islamic market index (Karachi Meezan Index [KMI-30]) in Pakistan during 2002–2013. The data have been divided into three parts, that is, preglobal (2002–2007), during (2007–2008), and postglobal financial crisis period (2008–2013), to examine the proposed relationship in different macroeconomic settings. Net trade cycle (NTC) and its components are used to measure the WCM efficiency, while NTC square is used to proxy the impact of excessive holdings of working capital on corporate performance. The econometric models are calculated in a generalized method of moments (GMMs)-based regression environment to ensure the robustness of empirical outcome. The results reveal that, as opposed to conventional businesses, KMI-30 firms are more ethical in their short-term financial management. Besides, such firms adopted a conservative WCM policy during the global financial crisis of 2007–2008. Furthermore, we confirm the presence of a concave relationship between working capital levels and firm performance as NTC is positively, whereas NTC square is negatively, related to firm performance. This article makes a significant contribution to the extant literature as it evaluates the impact of WCM on the profitability and market performance of Islamic market indexed firms under varying macroeconomic conditions.

scholarly journals The mediating role of board size, philanthropy and working capital management between basic corporate governance factors and firm's performance

2020 ◽  
Vol 27 (2) ◽  
pp. 135-151 ◽  
Author(s):  
Muhammad Naeem Shahid ◽  
Aamir Abbas ◽  
Khalid Latif ◽  
Ayesha Attique ◽  
Safwan Khalid
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Ownership Structure ◽  
Independent Directors ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
Sugar Mills ◽  
The Relationship

PurposeThis study aims to identify the impact of corporate governance on performance of sugar mills. In order to study this relation, a model is constructed in which ownership structure and independent directors are taken as independent variables. Whereas firm performance is analyzed by using proxy variables such as return on asset (ROA), return on equity (ROE) and sales growth. Moreover, size of board, working capital management (WCM) and philanthropy are taken as mediating variables between governance variables and firm performance.Design/methodology/approachThe data of 32 sugar mills listed at Pakistan Stock Exchange for the period of four years (i.e. 2014–2017) is used for this research. Moreover, to investigate the model, generalized least squares statistical method is used to measure the relationship between variables.FindingsThe results revealed that there is significant but positive relationship between independent directors and ROA while ownership structure and ROE have significant but negative relationship. Thus, the board of directors should make it sure that all stakeholders and organizations should increase the nonfamily ownership in firms for better corporate performance. Moreover, philanthropy and WCM mediate the relationship between corporate governance and firms' performance.Practical/implicationsThis research work will be helpful in the corporate governance, and further researchers can conduct their study by considering executive/nonexecutive director and institutional owners as governance variables.Originality/valueThis paper fulfills an identified need to study how Corporate Governance effect the performance of firm.

scholarly journals Mediating Role of Working Capital Management in the Relationship of Corporate Governance Measures and Firm Performance: Panel Study from Pakistan

2021 ◽  
Vol 7 (2) ◽  
pp. 273-286
Author(s):  
Areeba Khan ◽  
Rana Muhammad Shahid Yaqub ◽  
Awais Javeed
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Mediating Effect ◽  
The Other ◽  
Capital Management ◽  
Working Capital ◽  
Current Ratio ◽  
Working Capital Management ◽  
Relationship Of ◽  
The Relationship

Purpose: Corporate governance and management of working capital are seen as two main fields of corporate finance. The purpose of the research study is to examine the interrelationships between corporate governance, working capital management and performance of the firm.Design/Methodology/Approach: Sample consists of 140 non-financial firms listed on the Pakistan Stock Exchange from 2008 to 2015. Data has been analyzed by using structural equation model. Mediating effects of managing working capital have been tested by using the approach suggested by Preacher and Hayes (2008).Findings: The findings revealed that current ratio partially mediates the effect of size of the board and CEO role duality whereas fully mediates the Impact of a concentration of ownership on firm results. The other variable of working capital management i.e. cash conversion cycle has not shown any mediating effect in Corporate governance and the relationship between firm results. For the other relationship the study found that board size affects firm performance positively whereas CEO duality and audit committee independence have negative impact on profitability of firms. For the relationship of working capital management on firm Performance, the study identified substantial negative and positive impacts on firm performance of the cash conversion period and current ratio, respectively.Implications/Originality/Value: The current study was based on least considered variables and the pioneer in testing the complex relationship through SEM-AMOS.

Working Capital Management and Firm Performance Relationship: An Empirical Investigation of Australasian Firms

2020 ◽  
Vol 23 (03) ◽  
pp. 2050026
Author(s):  
Umar Nawaz Kayani ◽  
Tracy-Anne De Silva ◽  
Christopher Gan
Keyword(s):  
New Zealand ◽  
Firm Performance ◽  
Financial Crisis ◽  
Significant Relationship ◽  
Global Financial Crisis ◽  
Empirical Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle

This paper examines the empirical relationship between working capital management (WCM) and firm performance (FP) for Australasian publicly listed firms. Australia and New Zealand are attractive investment destinations due to their business friendly environments. The past two decades have seen increased academic attention in studies linking WCM and FP across various parts of globe. The empirical relationship between WCM-FP has not been sufficiently examined in regards to Australian and New Zealand firms. This study measures the role of WCM during the 2008 global financial crisis in both Australia and New Zealand firms. This study uses System General Method of Moments to address the endogeneity problem in order to reduce the possibility of biased results. The results show that WCM has a significant relationship with FP. More specifically, the Cash Conversion Cycle (CCC) and the Inventory Conversion Period (ICP) exhibit negative relationships with FP indicating that a reduction in the CCC and the ICP help to improve FP in Australasian firms. However, in the case of the Average Collection Period (ACP) and the Average Payment Period (APP), the results vary between both countries. In Australia, the ACP has no significant relationship, whereas APP has a positive relationship. This is contrary in the case of New Zealand firms. Another important finding is that firms in both markets were relatively efficient collecting their receivables during the 2008 global financial crisis period. These findings provide new empirical evidence that WCM matters for improving FP in Australasian firms.

Working capital management, firm performance and financial constraints

2017 ◽  
Vol 9 (3) ◽  
pp. 206-219 ◽  
Author(s):  
Nufazil Altaf ◽  
Farooq Shah
Keyword(s):  
Firm Performance ◽  
Method Of Moments ◽  
Financial Constraints ◽  
Generalized Method Of Moments ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between working capital management and firm performance for a sample of 437 non-financial Indian companies. In addition, this paper examines the impact of financial constraints on working capital management-performance relationship. Design/methodology/approach This study is based on secondary financial data of 437 non-financial Indian companies obtained from CAPITALINE database, pertaining to a period of ten years. This study employs the two-step generalized method of moments (GMM) technique to arrive at results. Findings Results of the study confirm the inverted U-shape relationship between working capital management and firm performance. In addition, the authors also found that the firms that are likely to be more financially constrained have lower optimal working levels. Originality/value Unlike prior studies, which found a linear relationship between working capital management and firm performance, this study provides newer evidence for an inverted U-shaped relation between investment in working capital and firm performance in India. In addition, this study also tests the impact of financial constraints on this relationship. In contrast to the prior studies, this study uses GMM to control the potential problems of endogeneity.

scholarly journals Manajemen Modal Kerja Dan Dampaknya Terhadap Nilai Perusahaan Dengan Corporate Governance Sebagai Variabel Pemoderasi

2014 ◽  
Vol 6 (1) ◽  
pp. 68
Author(s):  
Adrianus Dhimas Setyanto ◽  
Ika Permatasari
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Corporate Values ◽  
Working Capital Management ◽  
Enterprise Value ◽  
Cash Conversion Cycle ◽  
The Relationship

AbstractThis study aims to determine the effect of working capital management on firm value. Corporate governance is used as a moderating variable in this study to explore the role of corporate governance in the relationship between working capital management with corporate values. Program participants of Corporate Governance Perception Index (CGPI) are used as a sample during the period from 2003 to 2011 and listed on the Indonesian Stock Exchange (IDX). We were using simple linear regression and the testing of moderating effects were calculated by Moderated Regression Analysis (MRA). The results showed that the working capital management has an influence on the value of the firm. However, corporate governance variables failed to moderate the relationship between working capital management and enterprise value. It shows that companies and investors in the market still lack concern for the program response and Corporate Governance Perception Index (CGPI) as an assessment of the application of the principles of corporate governance that has been done by the company .Keywords: Working Capital Management, Cash Conversion Cycle, Corporate Governance, Firm Values

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