An Empirical Study on the Relationship Between Working Capital Management Efficiency and Firm Value of Chinese Manufacturing Listed Companies—Differences Between State-Controlled and Non-State-Controlled Companies

The primary objective of this study is to examine the impact of working capital management efficiency on the financial health/well-being of a company measured in terms of firm value in the context of a rapidly emerging economy. This study applies a multivariate ordinary least square regression analysis on industry adjusted performance variable of 1532 Indian firms listed on the National Stock Exchange (NSE) for a period of 18 years (from 1999-2017). Not all of the 1532 firms selected for this study were listed during the whole period of study. Only 610 firms were listed at the beginning and gradually more and more companies started to get listed until eventually 922 more companies got listed to the initial tally of 610 listed firms making the total number of listed companies to be 1532 by the end of the study period. A total of 19862 firm year observations correspond to listed firms and 9246 firm year observations for unlisted firms making it a total of 29108 firm year observations. The findings of this study indicate that an efficient working capital management (proxied by Cash conversion cycle and components thereof) leads to better firm performance when adjusted for industry differences. It also shows that the relationship follows a curvilinear trajectory instead of a linear one as a change in sign in the coefficient of working capital management proxy (Cash Conversion Cycle) occurs and its square term and both are manifesting itself as significant in the listed companies. This is a co-relational study investigating the association between working capital management efficiency and firm performance. The findings of this study is based in an economy that is unique in its own right. Indian corporate landscape is replete with business groups and they dominate the market in terms of asset holding and market capitalization coupled with the existence of institutional gaps and weak legal enforcement mechanisms. All of which makes the Indian corporate landscape totally different from its more developed counterparts thus rendering the results not generalizable. The relationship between these variables should be verified in other economies taking their unique characteristics into account. This study to the best of the author’s knowledge is the first one to investigate the relationship between working capital management and firm performance on such a comprehensive dataset having 62 different industries in an emerging economy. The findings of the study are intended to be of use to financial managers, investors, financial management consultants, and other stakeholders.

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

AKRUAL Jurnal Akuntansi ◽

10.26740/jaj.v6n1.p68-84 ◽

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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The Impact of Corporate Governance on Working Capital Management Efficiency: Evidence from the Listed Companies in the Consumer Services Sector in Botswana

International Journal of Economics and Finance ◽

10.5539/ijef.v10n12p135 ◽

2018 ◽

Vol 10 (12) ◽

pp. 135

Author(s):

Sathyamoorthi C. R. ◽

Christian J. Mbekomize ◽

Mogotsinyana Mapharing ◽

Popo Selinkie

Keyword(s):

Corporate Governance ◽

Listed Companies ◽

Capital Management ◽

Working Capital ◽

Governance Mechanisms ◽

Working Capital Management ◽

Management Efficiency ◽

Corporate Governance Mechanisms ◽

The Impact ◽

Moderate Relationship

The paper presents the findings of the analysis of the impact of corporate governance mechanisms on working capital management efficiency in the listed companies of the Consumer service sector in Botswana. Eight corporate governance elements and seven working capital components were extracted from the annual reports of a sample of six companies for the period 2012 to 2017 for the analysis. Thirty six observations were obtained. Pearson correlations were executed to determine the relationship between corporate governance elements and working capital components. OLS regression analysis was performed to establish the explaining power of the combination of corporate governance elements on each of the working capital components. The correlation analysis shows that number of non-executive directors has a significant negative but moderate relationship with cash conversion cycle and number of board subcommittees has significant positive but moderate relationship with Debt ratio. The regression results suggest that corporate governance mechanisms have a significant impact on working capital management, the highest impact being reflected on inventory conversion period. The implications of these findings are that boards of directors have a significant role to play in working capital management efficiency of the companies they govern. They should therefore continue providing attainable policies on working capital management and remain vigilant on demanding feedback on their implementations.

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EFFECT OF WORKING CAPITAL MANAGEMENT AND LEVERAGE ON COMPANY VALUE WITH PROFITABILITY AS MODERATING VARIABLES

International Journal of Economic, Business, Accounting, Agriculture Management and Sharia Administration (IJEBAS) ◽

10.54443/ijebas.v1i1.4 ◽

2021 ◽

Vol 1 (1) ◽

pp. 41-53

Author(s):

Rico Nur Ilham ◽

Majied Sumatrani Saragih ◽

Andri Saifannur

Keyword(s):

Firm Value ◽

Investment Decisions ◽

Capital Management ◽

Working Capital ◽

Moderator Variable ◽

Working Capital Management ◽

Moderating Variables ◽

Company Value ◽

The Relationship ◽

Made In

This study aims to determine how the influence of working capital management and leverage on firm value with profitability as a moderating variable. The research method used is quantitative data method. 1) Working Capital Management variable has a positive and significant effect on Firm Value. 2) Leverage variable has no significant effect on firm value. 3) Working Capital Management and Leverage variables have no simultaneous significant effect on Firm Value. 4)Profitability variable is a moderator variable that affects the relationship between Working Capital Management and Firm Value. 5) Profitability variable is not a moderator variable that can moderate the relationship between Leverage and Firm Value.Company value can be used as the basis for making investment decisions because this aspect measures the ability of the company's assets to generate a return on investment made in the company's asset instruments.

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Association between the availability of financial resources and working capital management with stock surplus returns in Iran

International Journal of Emerging Markets ◽

10.1108/ijoem-11-2017-0439 ◽

2019 ◽

Vol 14 (2) ◽

pp. 343-361 ◽

Cited By ~ 4

Author(s):

Mahdi Salehi ◽

Nadia Mahdavi ◽

Saeed Zarif Agahi Dari ◽

Hossein Tarighi

Keyword(s):

Stock Returns ◽

Firm Value ◽

Financial Constraints ◽

Cash Holdings ◽

Financial Resources ◽

Capital Management ◽

Working Capital ◽

Working Capital Management ◽

Content Type ◽

The Relationship

Purpose The purpose of this paper is to investigate the relationship between access to financial resources, working capital with surplus stock returns and value of the company in Iran. Design/methodology/approach The study population consists of 728 observations and 91 firms listed on the Tehran stock exchange during an eight-year period between 2009 and 2016. The statistical model used in this study is a multivariate regression model; further, the statistical technique used to test the hypotheses is panel data. Findings The results saw a negative and significant linkage between changes in cash and stock’ excess returns, whereas no meaningful association between changes in working capital and stock surplus returns was seen. In other words, an Iranian rial (Iran’s currency) invested in working capital worth less on average than a rial held in cash. Furthermore, the authors realized that in an inflationary economy, firms mainly pay more dividends so as to illustrate better their financial position and also to attract more investors’ trust. The results also indicated that the final value of working capital in the companies that are faced with financial constraints is more than companies that are not faced with financial constraints. Subsequently, after the elimination of the effects of inflation on stock returns, it was found there is not any significant association between the stock’s real return and firm value. Practical implications This is one of the most comprehensive research works in Iran that simultaneously surveys the impacts of access to finance and working capital on firm value. This research warns corporate managers to pay more attention to the importance of keeping cash to finance and manage working capital for profitability and sustainability of their company’s operations. Surely, by understanding the relationship between cash holdings, working capital management and stock surplus return, investors will be able to make appropriate decisions about the optimal choice of funds. Originality/value What really will fascinate other scholars about this paper is the time period of the study because there were unprecedented sanctions against Iran market and many manufacturing industries were in financial strain. Without hesitation, the paper will make aware investors and stakeholders of this fact that cash holdings will be a good way in reducing the corporate financial problems in emerging markets, particularly those markets face financial sanctions like Iran.

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Working capital management, firm performance and nature of business

International Journal of Productivity and Performance Management ◽

10.1108/ijppm-10-2019-0468 ◽

2020 ◽

Vol 70 (1) ◽

pp. 179-200

Author(s):

Kumar Sanjay Sawarni ◽

Sivasankaran Narayanasamy ◽

Kanagaraj Ayyalusamy

Keyword(s):

Firm Performance ◽

Firm Value ◽

Regression Models ◽

Age And Growth ◽

Capital Management ◽

Working Capital ◽

Working Capital Management ◽

Content Type ◽

The Impact ◽

The Relationship

PurposeThis paper aims to investigate the impact of the efficiency of working capital management (WCM) on the performance of a sample of Indian companies and explore how the nature of the firm's business influences the significance and direction of this impact.Design/methodology/approachThe data for this study were collected for the period of 2012–2018 for 414 non-financial firms listed on the Bombay Stock exchange. Fixed-effect regression models were run by taking Tobin's Q and return on equity (ROE) as dependent variables, and net trade cycle (NTC) and its components as explanatory variables in the presence of liquidity, leverage, size, age and growth as control variables. Sample firms were segregated into manufacturing, trading and service groups, and regression models were used for all the groups to understand the effect of the nature of a firm's business.FindingsWCM efficiency has a significant impact on the performance of the sample firms. Non-financial Indian firms deliver better financial performance by maintaining lower NTC. Like NTC, its components also impact firm value and profitability. The results report that the significance of the relationship varies depending upon the nature of the firm's business.Originality/valueThe previous research studies had not used a sample of large number of Indian firms. Unlike previous studies, this study reports the influence of the nature of business on the relationship between WCM and firm performance. Further, this paper also examines how the individual components of working capital influence the performance of Indian firms.

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Analysis of Working Capital Efficiency in Cipla Ltd.

Adhyayan A Journal of Management Sciences ◽

10.21567/adhyayan.v4i1.10197 ◽

2014 ◽

Vol 4 (1) ◽

Author(s):

Dr. Shishir Pandey ◽

Dr. Avadhesh Kumar Verma ◽

Sunil Kumar

Keyword(s):

Cash Flows ◽

Cycle Period ◽

Capital Management ◽

Working Capital ◽

Short Term ◽

Operating Cycle ◽

Working Capital Management ◽

Management Efficiency ◽

Capital Efficiency ◽

The Relationship

Decisions relating to working capital involve managing relationships between a firm’s short-term assets and liabilities to ensure a firm is able to continue its operations, and have sufficient cash flows to satisfy both maturing short-term debts and upcoming operational expenses at minimal costs, increasing firm’s profitability. The working capital very much associate with the operating cycle. A perusal of the operating cycle good reveal that funds invested in the operation are recycled back in to cash. The shorter the period of operating cycle the larger will be the turnover of the funds invested in various purposes. The shorter period of operating cycle shows better efficiency of a firm. The efficiency of working capital management can be determined by the operating cycle of the firm. This paper aims at analyzing the efficiency of working capital management through the relationship between operating cycle period and profitability of Cipla Ltd. To measure the Working Capital Management Efficiency, Operating cycle has been calculated and the relationship is made with Gross Profit Ratio.

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The Relationship between Working Capital Management, Financial Constraints and Performance of Listed Companies in Tehran Stock Exchange

Journal of Politics and Law ◽

10.5539/jpl.v10n2p248 ◽

2017 ◽

Vol 10 (2) ◽

pp. 248 ◽

Cited By ~ 1

Author(s):

Ali Kowsari ◽

Mohammad Reza Shorvarzi

Keyword(s):

Financial Constraints ◽

Negative Impact ◽

Stock Exchange ◽

Listed Companies ◽

Capital Management ◽

Working Capital ◽

Cross Sectional ◽

Working Capital Management ◽

And Performance ◽

The Relationship

The main objective of this study was to investigate the relationship between working capital management, financial constraints and performance of listed companies in Tehran Stock Exchange. To verify this financial information from 148companies listed on the Tehran Stock Exchange during the period 2009- 2013 were studied. Information required extracted from Rah Avard Novin 3 software, and thensummarized, classified, and calculated by Microsoft Excel, and finally through Eviews 8 and Stata 12 software were analyzed. According to the statistical procedures conducted in 95/0 reliability, the assumptions are tested. methods of the study are inductive reasoning and in terms of time are cross-sectional and in terms of relationship between variables is correlation. the results showed that ROA has a negative impact on working capital management. While financial constraints affect the relationship between working capital management and return on assets. better management of working capital can improve companies’ performance. On the other hand, effect of working capital on companies’ performance would be increased when facing financial constraint.

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