working capital management
213904306
The Interplay between Working Capital Management and a Firm's Financial Performance across the Corporate Life Cycle
The purpose of this study is to examine the impact of working capital management (WCM) and working capital strategy (WCS) on firm's financial performance across different stages of the corporate life cycle (CLC) We use Pakistani non financial listed firms nested in 12 diverse industries over a period of 2005 2014 as the research sample and employ the hierarchical linear mixed (HLM) estimator, which can process multilevel data where observations are not completely independent. The empirical findings reveal that, overall, WCM is negatively associated with firm performance. However, this association is not static across different stages of a firm's life cycle. For example, a negative association is more pronounced at the introduction stage followed by growth and decline stages, whereas WCM does not significantly impact the performance of mature firms. Likewise, WCS also causes varying effects on the financial performance across the CLC. A conservative strategy at the introduction, growth, and decline stages negatively affects firm performance, suggesting that these firms should adopt an aggressive strategy. Nevertheless, management of sample firms did not account for the respective life cycle stage while formulating a WCM strategy, which can seriously compromise their financial sustainability. These findings suggest that firms require customized WCM policies and WCS to attain sustainable financial performance at each stage of firm life cycle. Thus, managers should not overlook the significant role of CLC stages in their financial planning to ensure the sustainable functioning of the enterprise.
Zanxin Wang Minhas Akbar Ahsan Akbar
211336194
Working capital management: Financial and valuation impacts
Abstract This paper examines the longitudinal impact from 1990 to 2017 of continuous improvement programs and aggressive working capital practices on accounts receivable turnover, inventory turnover, days payables outstanding, and cash conversion cycle. We find statistically significant shifts in the means and in the skew for these variables consistent with stricter financial management and less risk taking in trade credit. The results are strongest in the transportation and communications industry and weakest in financial services. These metrics are associated with equity valuation impacts and with improved profitability as captured by return on invested capital.
Russell P Boisjoly Thomas E Conine Michael B McDonald
203186422
Working capital management in the Russian automotive industry supply chain
Abstract Companies must successfully finance their supply chains if they are to maintain their competitive advantage. Specifically, asset management in a supply chain is an essential component of improving one's financial stance. This study examines operational working capital management in the Russian automotive supply chain using the transaction cost theory (TCE) perspective. It considers working capital management (WCM) models with financial supply chain analysis using cash conversion cycles (CCC) and return on assets (ROA) as measurements. Companies operating with efficient WCM models are usually the leaders and the most powerful actors in the supply chain. Overall, according to our analysis long accounts payable payment period are prevalent, inventory levels high and CCCs short. Further, the most profitable firms are those that pay their suppliers promptly. The WCM models based on the data of this study may contribute to deliberate strategies and choices regarding the optimal governance structures of supply chains.
Miia Pirttila Veli-Matti Virolainen Lotta Lind Timo Karri
229307007
Working capital management and performance: Evidence from Italian SME's
WCM represents an important aspect of financial management policies and it requires the ability to monitor a firm's current assets and liabilities to meet short term obligations while avoiding excessive investments in shortterm assets. In firms of all sizes, by managing working capital efficiently, companies can reduce their dependence on external capital and use the released resources for other investments, improving the firm financial flexibility. The management of working capital for SMEs, where financial constraints often adversely affect their prospects, is crucial for the survival and success of the company. In this perspective, the aim of this study is to examine the relationship between working capital efficiency and profitability, focusing on SMEs operating in the agri food sector. To achieve this purpose, it was carried out a dataset of 112 Italian SMEs (784 firms/year observations) according to the requirements established under European Commission recommendation 2003/361/EC of 6 May, 2003. To evaluate the working capital management practices of the sample firms, this study uses quantitative analysis. Descriptive statistics, Pearson correlation, and regression analyses were used. The findings highlighted that the working capital cycle is statistically significant but negatively associated with firm profitability.
Luca Sensini
216392991
Impact of working capital management on business profitability: Evidence from the Polish dairy industry
The main purpose of this paper was to examine the causative link between Working Capital Management (WCM) and Return On Assets (ROA) in milk processing companies. Days Sales of Inventory (DSI) Days Sales Outstanding (DSO) Days Payable Outstanding (DPO) and the Cash Conversion Cycle (CCC) were used as WCM metrics. The study was based on micro data for Polish dairy companies from 2008 2017, retrieved from the Emerging Markets Information Service (EMIS) database. Based on panel regression models, it was demonstrated that extending the DSI and CCC had an adverse effect on ROA, whereas extending the DSO and DPO had a beneficial impact on ROA in dairy companies. Such relationships were mostly characteristic of SMEs which form the largest group of businesses in Poland.
Zbigniew Golas
216503419
The mediating role of board size, philanthropy and working capital management between basic corporate governance factors and firm's performance
This study aims to identify the impact of corporate governance on performance of sugar mills. In order to study this relation, a model is constructed in which ownership structure and independent directors are taken as independent variables. Whereas firm performance is analyzed by using proxy variables such as return on asset (ROA) return on equity (ROE) and sales growth. Moreover, size of board, working capital management (WCM) and philanthropy are taken as mediating variables between governance variables and firm performance.,The data of 32 sugar mills listed at Pakistan Stock Exchange for the period of four years (i.e. 2014 2017) is used for this research. Moreover, to investigate the model, generalized least squares statistical method is used to measure the relationship between variables.,The results revealed that there is significant but positive relationship between independent directors and ROA while ownership structure and ROE have significant but negative relationship. Thus, the board of directors should make it sure that all stakeholders and organizations should increase the nonfamily ownership in firms for better corporate performance. Moreover, philanthropy and WCM mediate the relationship between corporate governance and firms' performance.,This research work will be helpful in the corporate governance, and further researchers can conduct their study by considering executive/nonexecutive director and institutional owners as governance variables.,This paper fulfills an identified need to study how Corporate Governance effect the performance of firm.
Muhammad Naeem Shahid Aamir Abbas Khalid Latif Ayesha Attique Safwan Khalid
216333411
Assessing working capital management efficiency of Indian manufacturing exporters
The purpose of this paper is to empirically investigate the relationship between working capital management (WCM) efficiency and exogenous variables of the Indian manufacturing sector along with its sub industries that are involved in export activities.,Panel regression (fixed effects) was used on a sample of 563 Indian manufacturing firms involved in export activities, covering a time period from 2008 to 2018.,Industry wise results showed a significant relation of leverage, net fixed asset ratio, profitability, asset turnover ratio, total asset growth rate and productivity with cash conversion cycle (CCC),Firstly, having taken a sample from a developing economy, the results of our study may be generalizable only among developing contexts. Secondly, the time period taken in this study (2008 2018) has witnessed several economic fluctuations such as recession and demonetization which might differ for the firms or countries in normal conditions.,An improved working capital model could advance the firms' performance by reducing the CCC of the firm, thereby creating efficiency in WCM. In addition, the results of this study could be helpful for many stakeholders such as working capital managers, debt holders, investors, financial consultants and others for monitoring the firms.,This study contributes to the existing literature in the relation between WCM efficiency and exogenous variables of the Indian manufacturing firms engaged in the export activities. Moreover, this study is one of the few research studies to investigate this relationship among Indian export firms in different industries, thus filling the gap in similar work done in other countries.
Himanshu Seth Saurabh Chadha Namita Ruparel Puneet Arora Satyendra Kumar Sharma
216357161
Impact of working capital management on firm profitability: Empirical study in Vietnam
Article history: Received February 2 2019 Received in revised format February 27 2020 Accepted March 1 2020 Available online March 1 2020 This article studies the impact of working capital management (WCM) on firm profitability (FP) in Vietnam. The study uses the Generalized Least Squares (GLS) regression method using a sample of 5,295 firms (observations) listed on stock market in Vietnam from 2009 to 2018. First, the study found that inventory turnover, average receivables (AR) average payment (AP) cash conversion cycle (CCC) had negative impacts on the firm profitability (FP) However, when we continued using quadratic function, we found that INV, AR, AP and CCC had a non linear relationship (the U curve) with FP. These research results contribute managerial contributions for firms in efficiently using capital when considering its investment policy. by the authors; licensee Growing Science, Canada 20 (c) 20
Nguyen Thi Thanh Phuong Dang Ngoc Hung
216333503
Performance, working capital management, and the liability of smallness: A question of opportunity costs?
This article studies the relationship between working capital management and firm operating performance and focuses on the moderating effect of size. We use a large sample of 56,221 small, medium,
Vivien Lefebvre
53126926
Working capital management and profitability of wine firms in France: an empirical analysis
We estimated the impact of cash conversion cycle (CCC) on the return on assets of wine firms in France over the 2003 2014 period. After controlling for factors such as size, growth, tangibility and leverage, we found that CCC had a negative impact on the profitability of French wine firms, suggesting an aggressive working capital management strategy. However, there was no optimal level of CCC allowing firms to maximise their profitability. On the other hand, French wine firms should grant a payment delay to their customers while reducing the delay to sell stocked wines. They should also lengthen the payment delay to their suppliers while considering potential borrowing cost and potential discounts for early payments. A robustness check on two different sub periods shows that the recent global financial crisis had a significant impact on the relationship between working capital management and the profitability of wine firms in France.
Laurent Michel Amine Lahiani Beysul Aytac Thi Hong Van Hoang