Impact of Firm's Capital Expenditure on Working Capital Management: An Empirical Study across Industries in Pakistan
Various researchers have studied the Impact of capital expenditure on working capital management. This paper aims to analyze the impact of capital expenditure in the light of the fixed effect model on 96 listed companies with respect to working capital management. Data related to the specific time period of 2007-2010 has been focused. The impact of capital expenditure, operating expenditure and finance expenditure on working capital has been analyzed. In this connection, keeping in mind nature of the variables of the study, Net Liquidity Balance (NLB) and Working Capital Requirement (WCR) has been applied as a proxy of working capital management. Then six hypotheses were conducted in two groups. In the first group, we examine the impact of capital expenditure, operating expenditure and financial expenditure on Net Liquidity Balance and in the second group, we investigate the impact of capital expenditures, operating expenditures and financial expenditures on Working Capital Requirement. Capital expenditure has the insignificant relationship with Net Liquidity Balance and Working Capital Requirement. Operating expense has the significant negative relationship with Net Liquidity Balance and significant positive relationship with Working Capital Requirement. Finance expense has the significant negative relationship with Net Liquidity Balance and significant positive relationship with Working Capital Requirement.