scholarly journals Efficiency of Working Capital Management and Firm Value: Evidence From Chinese Listed Firms

2019 ◽  
Vol 10 (6) ◽  
pp. 133
Author(s):  
Ratnam Vijayakumaran
Keyword(s):  
Financial Management ◽  
Firm Value ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Trade Cycle ◽  
Accounts Receivable ◽  
Listed Firms ◽  
Chinese Listed Companies ◽  
The Relationship

This paper examines the relationship between the efficiency of working capital management (WCM) and the firm value, focusing on a large panel of Chinese listed companies. WCM which involves a trade-off between profitability and risk is a very important element of the financial management of the firm. The net trade cycle (NTC) and its components are used to measure efficiency of WCM, while the firm value is measured by the Tobin’s Q ratio. The study makes use of the panel data methodology to estimate the regression models. This study reports that the net trade cycle is negatively associated with firm value. More specially, the study finds that firm value is adversely affected by the number of days accounts receivable and inventories, indicating that working capital provides a real opportunity for financial executives to release cash and improve firms’ value. The findings of this study are consistent with the idea that managers can enhance firm value by efficiently managing the investment in working capital.

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

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

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

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.

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

2019 ◽  
Vol 14 (2) ◽  
pp. 343-361 ◽  
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.

Working capital management, firm performance and nature of business

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.

scholarly journals Working Capital Management and Corporate Profitability: Empirical Evidence from Vietnam

2018 ◽  
Vol 10 (1) ◽  
pp. 195-206 ◽  
Author(s):  
An Thanh Hong Nguyen ◽  
Tuan Van Nguyen
Keyword(s):  
Empirical Evidence ◽  
Trade Credit ◽  
Capital Management ◽  
Working Capital ◽  
Credit Policy ◽  
Working Capital Management ◽  
Listed Firms ◽  
Firm Profitability ◽  
Real Practice ◽  
The Relationship

Abstract This paper examines the relationship between working capital management and corporate profitability of Vietnamese listed firms. We propose a different interpretation of the empirical evidence that takes into account the dependency of collection and payment decisions. This helps establish the causal relationship between working capital management and firm profitability, which made the interpretation of the empirical results more meaningful and consistent with the real practice of firms. The analysis results based on a sample of 374 Vietnamese listed firms in the period from 2008 to 2014 show that working capital management positively affects the performance of Vietnamese listed companies. However, the results also indicate that Vietnamese firms do not intentionally use trade credit policy to enhance firms’ performance and the observed relationship between trade credit and profitability, though significant, is just by coincidence.

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.

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

2011 ◽  
Vol 15 (3) ◽  
pp. 71-88 ◽  
Author(s):  
Meryem Bellouma
Keyword(s):  
Negative Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Random Effects Models ◽  
Accounts Receivable ◽  
Cash Conversion Cycle ◽  
Fixed And Random Effects ◽  
Financial Decision ◽  
The Impact

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.

A Study on Working capital Management in Hindustan Petroleum Corporation Limited

2021 ◽  
pp. 164-168
Author(s):  
Sruthi B ◽  
Rashmi R
Keyword(s):  
Annual Report ◽  
Pearson Correlation ◽  
Secondary Data ◽  
Effective Management ◽  
Capital Management ◽  
Working Capital ◽  
Short Term ◽  
Working Capital Management ◽  
The Past ◽  
The Relationship

Working capital management is important for every organization as it refers to the effective management of current assets and current liabilities. The aim is to make sure that the firm is capable to continue its operations and it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. In this paper, an attempt has been made to study the management of working capital in Hindustan Petroleum Corporation Limited, a leading public sector enterprise in India over a period of 10 years (That is from 2009-10 to 2018-19). The paper also attempts to study the components of working capital and analyze the relationship between liquidity and profitability of HPCL. The study is based on secondary data collected from annual report of HPCL for the past 10 years, Pearson correlation and regression model are used for this purpose. From the study it is found that there is a significant relationship between liquidity and profitability.

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