The Effect of Working Capital Management on Dividend Policy: An Empirical Analysis of Listed Firms in Ghana

Financial Firms ◽

Cash Conversion Cycle ◽

Relying on more recent data spanning 2007-2016, this paper investigates the impact of working capital management (WCM) on dividend policy of listed non-financial firms in Ghana. Specifically, the study assesses the effect of cash conversion cycle (CCC), days inventory outstanding (DIO), profitability, and firm growth on dividend policy. Employing the ordinary least squares (OLS) analytical technique, the findings reported that working capital management (in terms of cash conversion cycle and days inventory outstanding) and dividend policy are positively related, with DIO having a significant effect on dividend policy. The results also established a positive association between the control variables (profitability and firm growth) and dividend policy albeit insignificantly. Based on the findings, the study concludes that working capital management in terms of days inventory outstanding (DIO) is a critical factor influencing firms’ dividend policy decisions. The study extends the inconclusive empirical evidence on the determinants of dividend policy and fills the lacuna in existing literature by focusing on how working capital management practices influence dividend policy of firms in Ghana. The findings are also useful to the board of directors of non-financial firms in deciding an appropriate dividend policy, and to the shareholders in making investment decisions.

The Effect of Working Capital Management on Dividend Policy: An Empirical Analysis of Listed Firms in Ghana

International Journal of Industrial Management ◽

10.15282/ijim6120205328 ◽

2020 ◽

Vol 6 (1) ◽

Author(s):

I.N Yakubu

Keyword(s):

Firm Growth ◽

Dividend Policy ◽

Management Practices ◽

Ordinary Least Squares ◽

Capital Management ◽

Working Capital ◽

Financial Firms ◽

Cash Conversion Cycle ◽

Relying on more recent data spanning 2007-2016, this paper investigates the impact of working capital management (WCM) on dividend policy of listed non-financial firms in Ghana. Specifically, the study assesses the effect of cash conversion cycle (CCC), days inventory outstanding (DIO), profitability, and firm growth on dividend policy. Employing the ordinary least squares (OLS) analytical technique, the findings reported that working capital management (in terms of cash conversion cycle and days inventory outstanding) and dividend policy are positively related, with DIO having a significant effect on dividend policy. The results also established a positive association between the control variables (profitability and firm growth) and dividend policy albeit insignificantly. Based on the findings, the study concludes that working capital management in terms of days inventory outstanding (DIO) is a critical factor influencing firms’ dividend policy decisions. The study extends the inconclusive empirical evidence on the determinants of dividend policy and fills the lacuna in existing literature by focusing on how working capital management practices influence dividend policy of firms in Ghana. The findings are also useful to the board of directors of non-financial firms in deciding an appropriate dividend policy, and to the shareholders in making investment decisions.

Working Capital Management and the Profitability of Non- Financial Firms Listed on the Zimbabwe Stock Exchange (ZSE)

European Journal of Business and Economics ◽

10.12955/ejbe.v9i2.517 ◽

2014 ◽

Vol 9 (1) ◽

Cited By ~ 1

Author(s):

Walter Gachira ◽

Washington Chiwanzwa ◽

Dingilizwe Jacob Nkomo ◽

Runesu Chikore

Keyword(s):

Firm Value ◽

Positive Relationship ◽

Stock Exchange ◽

Negative Relationship ◽

Capital Management ◽

Working Capital ◽

Financial Firms ◽

Cash Conversion Cycle ◽

Working capital is essential for the day-to-day operations of a firm. The study examines the impact of working capital management on the profitability of non-financial firms listed on the Zimbabwe Stock Exchange (ZSE). Using panel data methodology, the direction and extent of the impact of working capital management on profitability is scrutinised. The regression analysis is based on a panel sample of 39 non-financial firms listed on the ZSE from 2009 to 2013, the period under which the Zimbabwean economy has been operating under the multicurrency system. It was found that there is a positive relationship between debtors’ days and firm’s profitability, a negative relationship between creditors’ days and profitability and a positive relationship between firm’s cash conversion cycle and its profitability. There is some negative relationship between current ratio and profitability, while inventory turnover days and profitability are positively related. Debt to asset ratio as a control variable has a significant negative relationship with firm value and profitability. The results of the study show that for the companies included in the sample, there are mixed effects of the components of working capital on firm performance. Managers can thus create value for shareholders by taking note of the existence of such relationships and take measures that enhance firm profitability.

The effect of working capital management on profitability

International Journal of Research in Business and Social Science (2147-4478) ◽

10.20525/ijrbs.v9i6.872 ◽

2020 ◽

Vol 9 (6) ◽

pp. 114-122

Author(s):

Tarik Hossain

Keyword(s):

Negative Relationship ◽

Ordinary Least Squares ◽

Manufacturing Companies ◽

Capital Management ◽

Working Capital ◽

Manufacturing Firm ◽

Cash Conversion Cycle ◽

Collection Period ◽

This research aims to analyze the impact of efficient working capital management on the profitability of the manufacturing firm in Bangladesh. Fifty-two manufacturing companies listed with Dhaka Stock Exchange (DSE) have been selected randomly from 2012 to 2017. Return on Assets (ROA) and Return on Equity (ROE) are used as indicators of profitability, while the inventory conversion period (ICP), the average collection period (ACP), the average payment period (APP), and the Cash Conversion Cycle (CCC) are used as the independent variables which are used as a measurement of working capital management of the firm. Ordinary Least Squares regression models and Pearson's Correlation are used to establish the relationship between working capital management and profitability. The results revealed a significant negative relation between ROA and CCC, ACP; a significant negative relationship exists between ROE and CCC, APP. Manufacturing companies can increase profitability by decreasing the cash conversion cycle, average payment period, and average collection period. It also revealed that ICP is also positively related to ROA and ROE. Therefore, this research concludes that efficiently and effectively managing working capital is very important for increasing manufacturing companies' profitability.

The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms

Journal of Risk and Financial Management ◽

10.3390/jrfm14010009 ◽

2020 ◽

Vol 14 (1) ◽

pp. 9

Author(s):

Sorin Anton ◽

Anca Afloarei Nucu

Keyword(s):

Empirical Evidence ◽

Ordinary Least Squares ◽

Optimum Level ◽

Capital Management ◽

Working Capital ◽

Listed Firms ◽

Firm Profitability ◽

Break Even Point ◽

The purpose of this study is to investigate the relationship between working capital and firm profitability for a sample of 719 Polish listed firms over the period of 2007–2016. The scarcity of empirical evidence for emerging economies and the importance of working capital efficiency motivate the research on the working capital–financial performance relationship. The paper adopts a quantitative approach using different panel data techniques (ordinary least squares, fixed effects, and panel-corrected standard errors models). The empirical results report an inverted U-shape relationship between working capital level and firm profitability, meaning that working capital has a positive effect on the profitability of Polish firms to a break-even point (optimum level). After the break-even point, working capital starts to negatively affect firm profitability. The study brings theoretical and practical contributions. It extends and complements the literature on the field by highlighting new evidence on the non-linear interrelation between working capital management (WCM) and corporate performance in Poland. From the practitioners’ perspective, the results highlight the importance of WCM for firm profitability.

The Impact of Working Capital Management on Profitability: The Case of Small and Medium-Sized Export Companies in Tunisia

Management international ◽

10.7202/1005434ar ◽

2011 ◽

Vol 15 (3) ◽

pp. 71-88 ◽

Cited By ~ 7

Author(s):

Meryem Bellouma

Keyword(s):

Negative Relationship ◽

Capital Management ◽

Working Capital ◽

Random Effects Models ◽

Accounts Receivable ◽

Cash Conversion Cycle ◽

Fixed And Random Effects ◽

Financial Decision ◽

Working capital is an important component in the financial decision of the company. An optimal working capital management is reached through a trade off between profitability and liquidity. This study aims to provide empirical evidence about the effects of working capital management on the profitability of 386 Tunisian export SMEs observed from 2001 to 2008. The results of fixed and random effects models show a negative relationship between corporate profitability and the different working capital components. This reveals that Tunisian export SMEs should shorten their cash conversion cycle by reducing the number of days of accounts receivable and inventories to increase their profitability.

Cash Conversion Cycle and Profitability, Evidence from Jordan

Asian Journal of Finance & Accounting ◽

10.5296/ajfa.v11i2.15640 ◽

2019 ◽

Vol 11 (2) ◽

pp. 81

Author(s):

Manar Moffadi Al-Mohareb

Keyword(s):

Stock Exchange ◽

Theoretical Aspect ◽

Practical Aspect ◽

Manufacturing Firms ◽

Capital Management ◽

Working Capital ◽

Cash Conversion Cycle ◽

Amman Stock Exchange ◽

This study investigates the impact of working capital management and its components on profitability as a practical aspect, and how is compatible with the theoretical aspect. Besides, it examines other financial factors that may affect profitability by using a sample of Jordanian manufacturing firms listed in the Amman Stock Exchange for the period (2016-2018). Theoretically, manufacturing firms that have been studied have current assets over half of their total assets. Therefore, the working capital management role will be clearer on firm profitability.Practically, the results indicate that there is a significant relationship between the cash conversion cycle, which is considered as a proxy of working capital management, and profitability of the manufacturing firms. This provides an opportunity to create value for shareholders by decreasing receivable accounts and inventory, enhancing the profitability of the firms and reducing the collection period and by adopting effective credit policy.

Effect of Working Capital on Profitability of Selected Quoted Firms in Nigeria

Global Business Review ◽

10.1177/097215091201300301 ◽

2012 ◽

Vol 13 (3) ◽

pp. 367-381 ◽

Cited By ~ 10

Author(s):

Olayinka Olufisayo Akinlo

Keyword(s):

Trade Credit ◽

Capital Management ◽

Working Capital ◽

Credit Policy ◽

Inventory Policy ◽

Accounts Receivable ◽

Financial Firms ◽

Cash Conversion Cycle ◽

Accounts Payable

The article examines the relation between working capital management and profitability for a sample of 66 Nigerian non-financial firms for the period 1997–2007. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories; and the cash conversion cycle (CCC) is used as a comprehensive measure of working capital management. The results suggest that firm’s profitability is reduced by lengthening the number of days accounts receivable, number of days of inventory and number of days accounts payable. The result shows that shortening the CCC improves the profitability of the firms.

Working Capital Management (WCM) and Firm Performance in Emerging Markets: A Case of Bangladesh

Accounting and Finance Research ◽

10.5430/afr.v10n1p36 ◽

2021 ◽

Vol 10 (1) ◽

pp. 36

Author(s):

Rafiqul Bhuyan ◽

Mohammad Sogir Hossain Khandoker ◽

Noshin Tasneem ◽

Mahjuja Taznin

Keyword(s):

Stock Exchange ◽

Secondary Data ◽

Total Asset ◽

Capital Management ◽

Working Capital ◽

Return On Assets ◽

Cash Conversion Cycle ◽

Current Asset ◽

We examine the impact of efficient working capital management on market value and profitability. Using secondary data on selected firms from Dhaka Stock Exchange we explore the effects of various working capital components (i.e. cash conversion cycle (CCC), current ratio (CR), current asset to total asset ratio (CATAR), current liabilities to total asset ratio (CLTAR), debt to asset ratio (DTAR), siz,e and growth) to the firm’s performance by looking firm’s value i.e. Tobin’s Q (TQ) and profitability i.e. return on asset (ROA) and return on invested capital (ROIC). Our results show that, for both food and overall manufacturing sectors, there is a significant association between working capital variables and firm’s value & return on assets, but an insignificant association with return on invested capital.

Effects of Working Capital Management on Profitability: A Case of Nepalese Manufacturing Firms

International Research Journal of Management Science ◽

10.3126/irjms.v5i1.35869 ◽

2021 ◽

Vol 5 (1) ◽

pp. 130-147

Author(s):

Phadindra Kumar Poudel ◽

Pujan Maharjan

Keyword(s):

Significant Relationship ◽

Stock Exchange ◽

Capital Management ◽

Working Capital ◽

Current Ratio ◽

Cross Sectional ◽

Listed Firms ◽

Financial Firms ◽

Cash Conversion Cycle

The study deals with the relationship between firm characteristics of working capital management and firm profitability in Nepal. It examines if firm performance, return on assets is related to cash conversion cycle, days’ sales outstanding, days’ inventory outstanding and current ratio. The study is based on pooled cross-sectional data of 10 non-financial firms from 2071/72 to 2075/76 of listed firms in the Nepal Stock Exchange. The study employed descriptive and causal-comparative research design to attainthe purpose of this study. The result reveals that the current ratio has a positively significant relationship with profitability and days’ sale outstanding has negatively significant relationship with the financial performance of the firm.