scholarly journals Working Capital Management and Firm Performance

2018 ◽  
Vol 2 (2) ◽  
pp. 37-50
Author(s):  
Sunday Simon ◽  
Norfaiezah Sawandi ◽  
Mohamad Ali Abdul-Hamid
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Crisis Period ◽  
Listed Firms ◽  
Significant Difference

This study examines the relationship between working capital management (WCM) and firm performance during and after the financial crisis of 2007-2008 in Nigeria. During the crisis, lending conditions were deeply affected, and financing operations became challenging for firms. Although research findings on the causes and effects of the crisis on the economy are known, what remains unknown is whether the financial crisis had a significant impact on WCM performance. This knowledge is essential for developing resilience to withstand a possible crisis in the future because vulnerability remains high as a result of the deepened integration of many economies. Thus, this study addresses this issue using a sample of 675 firm-year observations from listed firms on the Nigerian stock exchange for the period from 2007 to 2015. The differences between the two periods, the crisis period and then after the crisis period, is operationalised through two analyses. First, OLS regression analysis was conducted to determine the explanatory powers of WCM for the two periods via their R2s. Second, a test of difference using the Cramer Z-statistic for the two periods was conducted. The findings indicate that WCM variables have more explanatory power (R2) in the period after the crisis than during the crisis. Also, the results revealed that the Z-scores are significant, implying that a significant difference existed between the two periods. This means that WCM was affected during the financial crisis and led to low profitability, whereas, during the after-crisis period, WCM associates with higher profitability.

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

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 ◽  
Working Capital Management ◽  
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.

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.

Does corporate governance influence the efficiency of working capital management of listed firms

2016 ◽  
Vol 7 (4) ◽  
pp. 482-496 ◽  
Author(s):  
Vera Fiador
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Firm Level ◽  
Working Capital Management ◽  
Content Type ◽  
Growth And Survival ◽  
Listed Firms ◽  
Cash Conversion Cycle

Purpose The purpose of this paper is to explore the relevance of corporate governance in the quest to attain organizational efficiency in the working capital management of listed firms. There is a consensus that efficiency of working capital management is vital for firm’s growth and survival, yet another consensus is the role of corporate governance in limiting managerial self-serving behavior and ultimately improving firm’s efficiency. If the foregoing views hold, then the empirical question “Is corporate governance important for firm-level working capital efficiency?” becomes important. Design/methodology/approach Panel data on 13 non-financial firms listed on the Ghana Stock Exchange were employed in a pooled OLS regression. Findings The results of the study indicate mostly a negative effect of internal governance mechanisms on the cash conversion cycle, the inventory, receivables’ periods and payables’ periods, implying that governance structures do affect the efficiency of working capital management. Firm characteristics like age, size and profitability also emerged as relevant influences on the efficiency of working capital management. Research limitations/implications Data for the study cut across several sectors thus limiting the specificity with which findings can be applied. Originality/value These findings have implications for board composition in the quest for firm-level efficiency while raising the need for more industry-specific enquiries.

scholarly journals Fleksibilitas Keuangan melalui Manajemen Modal Kerja pada Perusahaan Manufaktur dalam Kondisi Ketidakpastian

2021 ◽  
Vol 21 (02) ◽  
Author(s):  
Purwanto Purwanto
Keyword(s):  
Financial Crisis ◽  
Business Environment ◽  
Manufacturing Companies ◽  
Capital Management ◽  
Working Capital ◽  
Short Term ◽  
Financial Flexibility ◽  
Working Capital Management ◽  
Crisis Period ◽  
Positive Effect

Changes in the business environment are increasingly dynamic, uncertain and unpredictable. Financial flexibility through working capital management is important for either a survival strategy, adaptive or proactive in taking advantage of opportunities for change. This study aims to examine and analyze the effect of working capital management on company profitability under uncertainty. The research design was carried out in a natural laboratory during the uncertainty period of the 2008 global financial crisis. The study was conducted by comparing working capital management and performance of 106 manufacturing companies based on data from the Indonesia Capital Market Directory around the crisis period (2007-2011). Data analysis used multiple linear regression. The effect of the financial crisis is analyzed through simulation analysis. The results of the study found that the more conservative working capital policy for investment has a positive effect on profitability performance, while the greater the short-term liabilities become an obstacle to profitability performance. However, the effect of working capital policies for financing changed during the crisis period. The proportion of working capital to finance short-term debt has a positive effect on profitability performance in crisis conditions. The results of this study have implications for the role of working capital policies for financial flexibility under conditions of crisis and uncertainty. Keywords: Financial Flexibility, Working Capital, Uncertainty

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.

scholarly journals Does working capital determine firm performance? An empirical research of the emerging economy

2018 ◽  
Vol 2 (1) ◽  
pp. 14-33
Author(s):  
Naseem Ahamed
Keyword(s):  
Firm Performance ◽  
Listed Companies ◽  
Emerging Economy ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Listed Firms ◽  
Cash Conversion Cycle ◽  
Management Efficiency ◽  
The Relationship

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.

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

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 ◽  
Working Capital Management ◽  
Listed Firms ◽  
Firm Profitability ◽  
Break Even Point ◽  
The Impact

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.

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