scholarly journals Does Working Capital Management Influence Operating and Market Risk of Firms?

Risks ◽  
2021 ◽  
Vol 9 (11) ◽  
pp. 201
Author(s):  
Ahsan Akbar ◽  
Minhas Akbar ◽  
Marina Nazir ◽  
Petra Poulova ◽  
Samrat Ray
Keyword(s):  
Financial Management ◽  
Stock Price ◽  
Empirical Studies ◽  
Generalized Method Of Moments ◽  
Market Risk ◽  
Stock Market Volatility ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Operating Income

Extant empirical studies have predominantly focused on the nexus between working capital management (WCM) and corporate profitability. While there is a dearth of literature on the nexus between WCM and a firm’s risk, the present study examines Pakistani-listed firms coming from 12 diverse industrial segments to observe this association for a time span of ten years (2005–2014). To ensure robustness, we employed a System Generalized Method of Moments (SGMM) regression estimation to investigate the influence of WCM on the operational and market risk for firms. Empirical testing revealed that higher working capital levels were associated with lower volatility in firms’ stock price, which shows that shareholders prefer a conservative working capital policy. Moreover, firms with better cash positions were subject to lesser stock market volatility. In contrast, excess working capital and a larger net trade cycle were associated with increased volatility in the operating income. Besides, firms with lower working capital levels relative to their respective industry experienced fewer fluctuations in their operating profits. Our findings assert that short-term financial management has important ramifications for firms’ operating and market fundamentals. Practical implications are discussed for corporate managers and relevant stakeholders.

scholarly journals Impact of working capital management on profitability: Evidence from Pakistan oil sector

2015 ◽  
Vol 1 (1) ◽  
pp. 286
Author(s):  
M.Yousaf Raza ◽  
Muhammad Bashir ◽  
Khalid Latif ◽  
Touqeer Sultan Shah ◽  
Mushtaq Ahmed
Keyword(s):  
Financial Management ◽  
Capital Budgeting ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Operating Profit ◽  
Work In Process ◽  
Fixed Assets ◽  
Oil Sector ◽  
The Impact

This study explores the impact of working capital management on the profitability of the firms in the oil sector of Pakistan. For the purpose of testing this relationship data from the annual reports of the sample companies is used from the period 2006 to 2010. Cash conversion cycles (CCC), average receivable, Average inventory, average payable, and current ratio are used as a measure of working capital management, while gross operating profit is used as a measure of profitability of the firm. There are three major issues in financial management that are capital budgeting, capital structure, and working capital management. So working capital management is one of the three major issues in financial management. A commercial firm consists of two types of assets, which are fixed assets and current assets. Current assets of a firm consist of cash, bank balance, account receivable, raw material, work in process, and finished goods. While fixed assets of the business require capital expenditure and these are used in increasing the production of the business, the Current assets are used in utilizing the fixed assets in day to day transactions.  Hence Current assets are regarded as lifeblood for any business firm, the play vital role in the daily operations of the business. Current assets and current liabilities regarded as are very important component of total assets and they need to be carefully managed for the long term success of the business. In this paper working capital management provide us profit by using average payable and gross operating profit but other variables in hypothesis shows negative relationships with each other.

scholarly journals Working Capital Management and Its Impact on Profitability in Tyre Industry: A Study of Selected Companies

2021 ◽  
Vol 2 (1) ◽  
pp. 40-46
Author(s):  
Tushar Rameshbhai Ajmera
Keyword(s):  
Regression Analysis ◽  
Financial Management ◽  
Stock Exchange ◽  
Practical Implication ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Turnover Ratio ◽  
The Impact ◽  
Tyre Industry

Purpose: The main aim of this article is to find out the working capital management and its impact on profitability in Tyre Industry of selected companies which are listed on stock exchange in India. Approach/ Methodology/ Design: For the study, a time span of 8 years from 2011-12 to 2018-19 is considered, and based on it, any relation of net profit margin ratio and working capital components like current ratio, quick ratio, inventory turnover ratio, working capital turnover ratio is considered. The sample is selected based on higher market capitalisation during the study period. Regression analysis is also employed to investigate the impact of WCM on corporate profitability. Findings: The major findings of this study indicate that the profitability of Balkrishana was good   compared to the other companies. The working capital of Ceat shows highly positive working capital management, whereas Apollo shows negative working capital management. These results were identified with the help of accounting tool as Ratio analysis and statistical tools as Regression analysis and ANOVA test for selected data. Practical Implication: The study examines the scenario of tyre industry with the help of working capital management in selected companies. The results of the study could be an indicator of the performance of the selected companies.   Originality/Value:  This paper provides some key insights to health and efficiency of the selected companies. The working capital ratios are indicative of good working capital management, leading to identifying issue in financial management and eventually improving the performance of the tyre industry.

Working capital management and firms’ profitability: evidence from emerging Asian countries

2017 ◽  
Vol 6 (1) ◽  
pp. 80-97 ◽  
Author(s):  
Monica Singhania ◽  
Piyush Mehta
Keyword(s):  
East Asia ◽  
South Asia ◽  
Generalized Method Of Moments ◽  
Asia Pacific ◽  
South East Asia ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
The Impact

Purpose Excessive working capital or paucity of the same can impair the profits and health of an organization. The purpose of this paper is to analyze the impact of working capital management (WCM) on the profitability of firms for a sample comprising of non-financial companies in countries of South East Asia, South Asia and East Asia. Design/methodology/approach Analytical modeling has been used to estimate the impact of WCM on profitability with the help of financial data of the companies listed in major indices of the target countries (India, Pakistan, Myanmar, Sri Lanka, Bangladesh, Singapore, Thailand, Malaysia, Indonesia, Vietnam, Hong Kong, Japan, China, South Korea and Taiwan). The mathematical model presented in the paper has been tested using two-step-generalized method of moments. Findings The study reveals a non-linear relationship between profitability of a firm and WCM for 11 economies of the Asia Pacific region. Research limitations/implications The results are subject to the differences in the market dynamics of different economies (countries). Moreover, the limitations of the specific statistical method used to verify the model apply to the model too. Practical implications The research can be used as a tool by the firms (global as well as local) to ameliorate their performance by understanding the effects of WCM on profitability in different global markets and adjusting their working capital accordingly. Originality/value The research on the impact of WCM on profitability of the firms of South East Asia, South Asia and East Asia is a new effort and tries to make the importance of WCM more luciferous.

scholarly journals Topics In Finance Part IX Working Capital Management

2012 ◽  
Vol 5 (6) ◽  
pp. 633-642
Author(s):  
Judy Laux
Keyword(s):  
Financial Management ◽  
Theoretical Perspective ◽  
Agency Conflicts ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Risk Return ◽  
Current Article

The final topic in a series looking at financial management from a theoretical perspective, working capital management provides the focus of the current article. We investigate how three key axiomsthe risk-return tradeoff, agency conflicts, and stockholder wealth maximizationrelate to this activity that occupies much of the financial managers time.

scholarly journals The impact of merger on working capital management efficiency of American production firms

2016 ◽  
Vol 13 (3) ◽  
pp. 100-109 ◽  
Author(s):  
Amarjit Gill ◽  
Nahum Biger ◽  
Rajen Tibrewala ◽  
Pradeep Prabhakar
Keyword(s):  
Causal Relationship ◽  
Research Design ◽  
Financial Management ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Management Consultants ◽  
Management Efficiency ◽  
The Impact

The purpose of this study is to examine the impact of merger on the efficiency of working capital management of American production firms. This study applied a co-relational research design. A sample of 497 listed American production firms for a period of 4 years (from 2010-2014) was analyzed. The findings of this study indicate that mergers may contribute to an improvement of the efficiency of working capital management. This is a co-relational study that investigated the association between merger and working capital management efficiency. There is not necessarily a causal relationship between the two, although the paper provides some conjectures to such relationship. The findings of this study may only be generalized to firms similar to those that were included in this research. This study contributes to the literature on the factors that improve the efficiency of working capital management, and in particular on the association between merger and the efficiency of working capital management. The findings may be useful for financial managers, investors, financial management consultants, and other stakeholders.

scholarly journals Problems and Countermeasures of Working Capital Management in Company V

2021 ◽  
Vol 5 (9) ◽  
pp. 85-90
Author(s):  
Yunjie Liu
Keyword(s):  
Financial Management ◽  
Manufacturing Industry ◽  
Rapid Development ◽  
Capital Management ◽  
Working Capital ◽  
Daily Production ◽  
Working Capital Management ◽  
Management Level ◽  
Home Appliance ◽  
Production And Operation

Working capital is the premise for the production and operation of an enterprise and the basis for all financial management. The management of working capital has gained more attention by enterprises. The purpose of emphasizing the importance of working capital management is to enable enterprises to make full and efficient use of capital. There is a serious shortage of working capital in China’s home appliance manufacturing industry, and with the rapid development of home appliance manufacturing industry, the problem is becoming increasingly prominent. Therefore, improving the management level of working capital, optimizing the structure of capital, and improving the efficiency of working capital should become the most important part in the process of daily production and operation. This article selects company V as the research subject as it has representative problems in working capital management. Drawing on the theoretical method of taking elements as the core, this article focuses on the analysis of each working capital project and the development status of the company as a whole, determines the problems in the aspects of current assets and information communication in regard to the working capital management of company V, as well as puts forward several suggestions in terms of current assets management. In order to improve the working capital management level of company V, we hope that the improvement suggestions derived from the combination of theory and practical analysis can provide some reference for other enterprises in the household appliance manufacturing industry.

Providing a New Model for Assessment of Working Capital Management:Evidence from Tehran Stock Exchange

2015 ◽  
Vol 1 (1) ◽  
pp. 108
Author(s):  
Seyed Reza Seyednezhad Fahim ◽  
Meysam Kaviani ◽  
Mohamad Pashaei Fashtali
Keyword(s):  
Financial Management ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Organization Management ◽  
New Model ◽  
Cash Conversion Cycle ◽  
Relationship Of

Working Capital Management (WCM) is one of the key facets of financial management and organization management, for the direct effect it has on company liquidity and profitability. There is a probability of bankruptcy for companies with poor working capital management despite generation of positive return. Current paper explains the relationship of WCM with profitability-based indicators at the hand of a new model. For this purpose, 90 listed companies on Tehran Stock Exchange whose financial data for the period 2008 through to 2012 was available were selected. The results do not confirm significant inverse U-shape relationship of Cash Conversion Cycle (CCC) and Net Working Capital to Total Assets (NWC/TA) as indicators (predictors) of working capital with Return on Assets (ROA), but do indicate a significant inverse U-shape relationship of current ratio and quick ratio with ROA. From the findings, one might infer that each industry has its own optimum current and quick ratios maximizing its return.

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 Exploring the Relationship between Working Capital Management, Profitability and Capital Structure

2017 ◽  
Vol 2 (1) ◽  
pp. 38-45
Author(s):  
Abdalla Geth Abdussalam ◽  
Mohd Ridzuan Darun
Keyword(s):  
Capital Structure ◽  
Empirical Studies ◽  
Relevant Literature ◽  
Cash Flows ◽  
Jel Classification ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Main Component ◽  
The Relationship

Objective - This paper explores the relationship between working capital management (WCM), profitability and capital structure. A preliminary framework provides an understanding of the role of WCM components with capital structure and profitability. Methodology/Technique - From the review of empirical studies it is confirmed that WCM is a main component in the financial aspects of the firms as even though WCM is targeted for the short-term decisions it has effect on the firm for the long-run. Findings - Companies need to use working capital policy and procedures in order to navigate performance. Emphasizing on WCM would lead to formal cost controls and performance together with firm's growth and productivity. The framework is set to help financial manager of the firms to balance the costs and benefits of debt and equity and reduce common obstacles on managing cash flows for long-term fixed investment. Novelty - The preliminary framework is original and unique that will contribute towards the enrichment of relevant literature. Practically, this study contributes to provide a better understanding of the managers and enable them to apply WCM strategies and make sure the firm is able to meet the stakeholder requirements. Type of Paper Review Keywords: Working Capital Management; Capital Structure; Profitability; JEL Classification: O16, M41.

scholarly journals WORKING CAPITAL MANAGEMENT AMONG LISTED COMPANIES OF PAKISTAN

2017 ◽  
Vol 5 (2) ◽  
pp. 80-91
Author(s):  
Waqar Ul-Hassan ◽  
Mohsin Zubair ◽  
Zeeshan Hasnain ◽  
Shahbaz Hussain
Keyword(s):  
Stock Exchange ◽  
Pearson Correlation ◽  
Sample Selection ◽  
Selection Criterion ◽  
Listed Companies ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Operating Income ◽  
Cash Conversion Cycle

The study aims to investigate the strength of working capital management for measuring the financial performance of listed stocks. The study incorporates descriptive statistics, Pearson correlation, and multiple regression models for interpretation and execution of data. Five years (2006-11) panel data of 125 listed companies of Pakistan stock exchange (PSX) is selected in accordance to sample selection criterion. Results of regression analysis supported an inverse relationship between firm`s profitability and working capital management. Return on asset and Gross operation income are taken as indicators of profitability. Inventory turnover in days, Average age of A/R, Average payable period and Cash conversion cycle are considered as independent variables to measure firm’s profitability. Firm size, Sales growth, and financial debt ratio are favored as control variables. Overall Return on asset models indicated poor values of R-square`s and Gross operating income models showed robustness.

Sign in / Sign up

Export Citation Format

Share Document