working capital
159043663
An analysis of working capital management
S Ramya J Atchaya Aardra Mariya Sam S Akalya
159152794
Working capital financing, firm performance and financial constraints
Purpose The purpose of this paper is to examine the relationship between working capital financing and firm performance for a sample of 437 non financial Indian companies. In addition, this study examines the impact of financial constraints on working capital financing performance relationship. Design/methodology/approach The study is based on secondary financial data of 437 non financial Indian companies obtained from Capitaline database, pertaining to a period of 10 years (2007 2016) This study employs two step generalized method of moments techniques to arrive at results. Findings Results of the study confirm the inverted U shape relationship between working capital financing and firm performance. In addition, the authors also found that the firms that are likely to be less financially constrained can finance greater proportion of working capital using short term debt. Originality/value This study contributes to the scant existing literature by testing the impact of financial constraints on the relationship between working capital financing and firm performance, representing a typical emerging market in India.
International Journal of Managerial Finance
Nufazil Altaf Farooq Ahmad
127108371
Working capital optimization in a supply chain perspective
Abstract Effective working capital management encourages rapid turnover of inventory and capital from a single firm perspective. This strategy could cause financial pressure on a firm's suppliers or distributors, hurt the supply chain, and even have an adverse effect on the firm itself. We attempt to find out the optimal deploying of working capital in a supply chain perspective. A supply chain with one supplier and one retailer who faces uncertain demand is considered. The payment period of the retailer is determined to maximize the profits, besides the wholesale price and the order quantity. We build three models to capture different cooperation levels of the supply chain: non cooperative, negotiatory and centralized. The equilibrium solutions show that the payment period should be maximized when the retailer's discount rate is higher than the supplier's and vice versa, regardless of the cooperation levels. In consideration of different claims of profit sharing, we propose the supply chain oriented solution of working capital management.
Eur. J. Oper. Res.
Juan Peng Zhili Zhou
168945675
Working capital management during the global financial crisis: Evidence from Japan
This paper demonstrates the adjustment speed of firm working capital and the relationships between working capital and firm performance in Japan during the global financial crisis. Using quarterly firm level data, we find that the adjustment of working capital was weaker during the crisis. Moreover, the negative relationship between excess working capital and firm performance became more significant during the crisis, especially for larger firms. However, this crisis related working capital firm performance effect does not appear to persist for very long, because to finance any excess working capital, firms borrow from banks and reduce their internal cash both during and outside periods of crisis.
Japan and the World Economy
Daisuke Tsuruta
229136867
Working Capital Management
Urmila Yogesh Gite
30579413
Exchange Rates and the Working Capital Channel of Trade Fluctuations
Global value chains (GVCs) figure prominently in global trade and lie at the intersection of two important themes. The first is the financing requirement for working capital. The second is the prevalence of dollar invoicing in global trade.
Valentina Bruno Se-Jik Kim Hyun Song Shin
168314031
Bank credit and corporate working capital management
We investigate how the availability of bank credit influences how public firms manage their working capital, and particularly those firms that depend more on the availability of such credit. We not only provide an enhanced understanding of what significantly influences corporate working capital management, but also find that on average, reductions (increases) in bank credit was associated with increases (decreases) in both a firm's current assets and its current liabilities. Further, we find that these responses are very similar for bank dependent and non bank dependent firms, except in cash holdings and supply chain financing. Overall, our evidence points to the use of trade credit and reverse trade credit as important buffers to changes in the availability of bank credit.
Cho-Jieh Chen Robert L Kieschnick
158376093
Working capital financing and corporate profitability of Indian manufacturing firms
The purpose of this paper is to provide empirical evidence about the relationship between working capital financing (WCF) and firm profitability in six key manufacturing sectors of Indian Economy. It also aims to capture the change in the financing of working capital requirement over different scenarios of price cost margin and financial flexibility.,The study is undertaken on a sample of 1,211 firms from 6 key manufacturing sectors of Indian economy from 2000 to 2016. The non linear relationship between WCF and profitability is studied using two step generalized model of moments (GMM) estimator.,The study finds a convex relationship between WCF and profitability among firms in chemical, construction, and consumer goods sectors. Firms in these sectors can finance larger portion of their working capital requirements through short term debt without negatively impacting profitability. However, a concave pattern of relationship for firms in machinery, metal, and textile industries implies increasing debt financing of working capital requirement would increase profitability for the firms who have financed lower portion of their working capital by short term bank borrowing. But when a higher proportion of working capital requirements are already financed by short term debt, a further increase in debt financing may impact profitability negatively. Moreover, the study finds that firms with high financial flexibility and high price cost margin (except textile) can increase profitability by financing larger portion of working capital requirement through short term debts and the continuation with risky WCF could increase profitability.,The study contributes to the literature on working capital in a number of ways. First, no previous study has been undertaken to explore the non linear relationship between WCF and corporate profitability over a large sample of firms from six key manufacturing sectors of Indian economy. Second, the study uses a quadratic function to explore the non linear relationship between WCF and profitability. Third, the study explores the relationship between WCF and profitability with respect to the price cost margin and financial flexibility of firms under different manufacturing sectors of Indian economy. Finally, the study uses advanced two step GMM, the panel data techniques to handle unobservable heterogeneity and issues of endogeneity within the data sample.
Ajaya Kumar Panda Swagatika Nanda
73562814
Working capital management and bank performance: empirical research of ten deposit money banks in Nigeria
Working capital management is germane for the success of the banking industry in Nigeria, especially the current state of the sector, which is engulfed with the effect of the global decline in oil price that has resulted in non performing loans, deterioration of the bank asset quality, laying off of staff amongst others. This is one of the reasons why the profitability of the banking sector deeply depends on the efficient management of a bank's working capital. Therefore, the objective of this study is to examine how profitability of banks can be enhanced through the working capital management. To empirically carry out the analysis, panel data which consist of ten (10) deposit money banks in Nigeria for seven years (2010 2016) employing the panel fixed effect, panel random effect and the pooled OLS for the two models, which were used as proxies for bank profitability, which includes return on asset (ROA) and return on equity (ROE) to examine the best measure for bank profitability, with the indicators of working capital; net interest income, current ratio, profit after tax, and monetary policy rate. Results of the study showed that working capital management has a significant effect on the profitability of the selected banks and that return on asset is a better measure for bank profitability. Therefore, the study recommends that there should be a periodic review of the minimum capital base of the Nigerian deposit money banks so as to mitigate the effects of inflation and inculcate the consequence of time value of money, because the purchasing power of one (N1) naira or one $1) dollar today would not be sufficient to purchase what it can purchase today for tomorrow. Osuma Godswill (Nigeria) Ikpefan Ailemen (Nigeria) Romanus Osabohien (Nigeria) Ndigwe Chisom (Nigeria) Nkwodimmah Pascal (Nigeria) BUSINESS PERSPECTIVES LLC "SPS "Business Perspectives" Hryhorii Skovoroda lane, 10, Sumy, 40022, Ukraine www.businessperspectives.org Working capital
Osuma Godswill Ikpefan Ochei Ailemen Romanus Anthony Osabohien Ndigwe Chisom Nkwodimmah Pascal
158868872
Investment and financial constraints in Indian firms: Does working capital smoothen fixed investment?
The purpose of this paper is twofold, first to examine the investment cash flow sensitivity in fixed and working capital investments and second to determine the role played by working capital in smoothing fixed investment. The study is based on secondary financial data of 254 Indian manufacturing firms obtained from CAPITALINE database, pertaining to a period of 10 years. This study employs two step AB difference GMM estimator proposed by Arellano and Bond (Rev Econ Stud 58(2):277 297, 1991) to arrive at results. Results of the study confirm that working capital investment is excessively sensitive to cash flow shocks. Further we found that both fixed and working capital investment in constrained firms are more sensitive to cash flow shocks when compared to unconstrained firm. Furthermore, the fixed investment smoothing is higher in case of constrained firms. The study is a pioneer in testing whether fixed and working capital investments are sensitive to cash flow shocks and how investment cash flow sensitivity changes with financial constraints of Indian firms. In addition, this study tends to examine the role of working capital in smoothing the fixed investment. Furthermore, this study explains this phenomenon in more detail by focusing on investment smoothing across constrained and unconstrained firms.
Nufazil Altaf Farooq Ahmad Shah