Corporate Governance and Working Capital Policy: An Unobserved Influence

Coleman, Martha; Wu, Mengyun; Baidoo, Mark

doi:10.1177/2394901520907710

Cited by 3 publications

(4 citation statements)

References 17 publications

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“…A strand of literature emerges in the favor of strong CG structures and their ability to improve WCM and firm performance (Abbas et al, 2019;Coleman et al, 2020;Fiador, 2016;Gill and Biger, 2013;Kayani et al, 2019;Khan et al, 2021). While studies have empirically linked audit committee characteristics, the board size, ownership structures and independent directors with WCM, there is scarce empirical literature related to the relationship between BGD, BFE and WCM.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Board diversity and working capital management strategies: evidence from energy sector of Pakistan

Khan

Yahya

Waqas

2022

JEAS

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Purpose This study investigates the mediating role of working capital management (WCM) efficiency between board diversity (based on gender and financial knowledge) and firm performance. The study further examines which WCM approach (conservative, moderate, and aggressive) they employ to increase (decrease) firm performance.Design/methodology/approach The study employs listed energy firms of Pakistan over the period 2010 to 2019. The system generalized method of moments estimator and logit model are utilized to estimate the underlying relationships.Findings The results show that WCM efficiency partially mediates the relationship between board financial expertise (BFE) and firm performance. Nonetheless, the presence of female directors is merely symbolic until they reach a certain level as only the quadratic term of board gender diversity (BGD) has a significant effect on firm performance. Female directors do not influence WCM efficiency. The results also demonstrate that BGD encourages a conservative WCM approach, while BFE encourages a moderate WCM approach. Furthermore, both conservative and moderate WCM approaches are significantly associated with firm performance.Practical implications The findings hold implications for increasing the representation of women and financial experts on board to improve the capital structure decisions of the energy firms in Pakistan.Originality/value This study is the first attempt to explore the mediating role of WCM efficiency between board diversity and firm performance. To the best of the authors' knowledge, no previous study has investigated the effect of BGD and BFE on different WCM approaches distinctly.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Board diversity and working capital management strategies: evidence from energy sector of Pakistan

Khan

Yahya

Waqas

2022

JEAS

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“…Attributes of board of directors are vital in explaining the effectiveness of management of WC and it can be argued that through better governance practices efficiency in management of working capital can be achieved. Coleman et al (2020) postulated that governance attributes, such as board size and duality have substantial impact on WCM. A study was performed by Gill and Mathur (2011) on corporations of Canada to evaluate the relationship among CG characteristics for example size of the board, CEO duality, and net WC.…”

Section: Literature Reviewmentioning

confidence: 99%

“…tiveness of management of WC and it can be argued that through better governance practices efficiency in management of working capital can be achieved Coleman et al (2020). postulated that governance attributes, such as board size and duality have substantial impact on WCM.…”

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confidence: 99%

Corporate governance, working capital management, and firm performance: Some new insights from agency theory

et al. 2021

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The role of corporate governance in performance of firms has been widely discussed in the extant literature. In contrast to examining direct relationships, this study investigates the mediating role of working capital management within these connections. Employing a large sample of nonfinancial firms listed on Pakistan Stock Exchange from 2009 to 2018, findings suggest that a corporate governance quality index and efficiency of working capital management are positively related to firm performance. Additionally, the results indicate that working capital management partially mediates the relationship between corporate governance and firm performance. These findings extend existing literature by offering new empirical and theoretical insights.

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“…The board of directors is a pivotal governance mechanism that plays a significant role in strategic decision-making and monitors a firm’s policies, such as its WC policy (Gill and Biger, 2013; Fiador, 2016; Coleman et al , 2020). Moreover, as discussed by Kumpamool and Chancharat (2022), as WC is both a crucial firm asset that generates cash flow and an internal source of capital for firms, the appropriate WC policy facilitates high cash flows and reduces the cost of financing, leading to an increase in firm value.…”

Section: Introductionmentioning

confidence: 99%

Female directors and working capital management: aggressive vs. conservative strategy

Guizani

Abdalkrim²

2022

MRR

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Purpose The purpose of this study is to analyze the impact of board gender diversity (BGD) on working capital management (WCM) decision by scrutinizing different positions covered by female board directors. Design/methodology/approach This study uses a panel data regression model with fixed effect estimations and the generalized method of moments (GMM) to determine the impact of BGD on WCM strategy. This study uses a panel data analysis for 277 non-financial firms listed on Bursa Malaysia over the period from 2011 to 2019. Findings The results of this study show that female directors fulfilling either monitoring or executive positions increase the investment in working capital (WC), suggesting a conservative WCM. Precisely, results from this study are consistent with the embedded risk aversion traits of female executives and, hence, preserve high level of investment in WC, which allows superior levels of liquidity to meet firms’ financial commitments. The results also show that Malaysia commitment to gender equality is a key moderator in the female directors – firm WCM relation. The authors find that when the level of gender equality is greater, female directors support firms in adopting aggressive WCM strategies. Practical implications This study’s findings provide insights for corporate decision-makers in helping them to determine the board’s design in term of roles and composition that enhances the efficiency of WC. The results also provide guidelines for policymakers and regulators to formulate strategies that support more female board representation. In this way, firms should appoint more female directors on their boards to ensure prudent WC decisions. Moreover, given that female directors are an important determinant of a firm’s WC policy, investors and various internal or external monitoring groups need to factor boardroom gender diversity into their investing, hiring and monitoring mechanisms. Originality/value While prior research has examined the effect of BGD on firm performance, to the best of the authors’ knowledge, this study is the first to investigate the effect of BGD on the WCM decision.

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Corporate Governance and Working Capital Policy: An Unobserved Influence

Cited by 3 publications

References 17 publications

Board diversity and working capital management strategies: evidence from energy sector of Pakistan

Board diversity and working capital management strategies: evidence from energy sector of Pakistan

Corporate governance, working capital management, and firm performance: Some new insights from agency theory

Female directors and working capital management: aggressive vs. conservative strategy

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