Defined strategies for financial working capital management

Talonpoika, Anna-Maria; Kärri, Timo; Pirttilä, Miia; Monto, Sari

doi:10.1108/ijmf-11-2014-0178

Cited by 26 publications

(27 citation statements)

References 31 publications

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“…This definition fits best in the context of WCS as it is the centerpiece of the overall firm performance. While the environment might also be considered as a factor affecting WC [54]. Firms pursue either an aggressive or a conservative WCS 23 and this strategic choice can significantly affect their risk and profitability [55].…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle

Wang

Akbar

2020

Sustainability

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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.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle

Wang

Akbar

2020

Sustainability

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“…Sagner (2014) expresses his view on working capital which is the financial health of an organization and connected it to profitability and growth. Talonpoika, Karri, Pirttila, and Monto (2016) described net working capital as current assets less current liabilities. Operational working capital consists of inventories, accounts receivables and accounts payables while financial working capital includes the net working capital that is not tied into operations, such as cash (Knauer & Wohrmann, 2013).…”

Section: Working Capital Managementmentioning

confidence: 99%

Do Corporate Governance Practices Influence Working Capital Management Efficiency? Evidence From Listed Manufacturing Companies in Sri Lanka

Kengatharan¹,

Tissera²

2019

RWE

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The purpose of the study is to investigate the influence of corporate governance practices on working capital management efficiency in the listed companies of the manufacturing sector in Sri Lanka. Board meeting, board size, CEO tenure and size of the audit committee are used as corporate governance practices and the cash conversion cycle is calculated to measure the working capital management efficiency. Sales growth and firm size are considered as control variables to evaluate the influence of corporate governance practices on working capital management efficiency. Relevant data are extracted from the annual reports of 30 listed manufacturing companies for the period from 2013 to 2017. Finally, 150 observations are used for the data analysis. Pearson correlations are executed to determine the relationship between corporate governance practices and working capital management efficiency. OLS regression analysis is performed to determine the explanatory power of the combination of corporate governance practices on the efficiency of working capital management. The correlation analysis shows that board meeting, CEO tenure and firm size have a significant positive relationship with cash conversion cycle. The regression results suggest that board meetings and CEO tenure have a significant positive influence on cash conversion cycle. Generally, the shorter the cash conversion cycle is better for the business, therefore, according to this result the increase in a board meeting and CEO tenure have the considerable decreasing in liquidity position in an organization. Therefore, the outcome of the study may be useful to the top management of the firms and practitioners when they are implementing governance mechanisms in order to enhance the working capital efficiency.

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“…Consequently, the demand for capital from within the SC, e.g. from companies directly involved in supply chain finance (SCF) schemes or acting as financial service providers (FSPs) has increased [9][10][11][12][13][14][15][16]. For this reason, the importance of effective WCM has raised dramatically, especially for SCs from emerging markets, which faced difficulties with access to capital, limited financial infrastructure and legal, regulatory and accounting uncertainties in the first place.…”

Section: Introductionmentioning

confidence: 99%

Working Capital Optimization in Supply Chains

Zenkevich

Ivakina

2018

КФ

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This article is devoted to working capital management and its optimization on an inter-organizational level when supply chain members operate collaboratively. We aim to develop and validate a model of collaborative approach to working capital management in supply chains for cases of constrained liquidity and imposed return requirements using supply chain finance (factoring, reverse factoring and inventory financing). As such, we suggest a tool of working capital optimization using financial terms and cash flows verified on Russian supply chain data. Mathematical modeling is suggested as a method to modify an existing working capital management model on the grounds of collaborative financial cost minimization under industry specific liquidity constraints. These liquidity constraints are constructed in such a way as to eliminate possible violations from companies, because their violation will lead to the inverse relation between liquidity and rate of return. The results of the optimization provide recommended values for cash conversion cycle elementsdays of inventories, days of accounts payable, days of accounts receivable -that guarantee the coordinating effect of collaborative working capital management. Calculation, further optimization and monitoring of cash conversion cycle values sustain effective working capital management on an inter-organizational level while meeting the liquidity and return levels for each company in a chain. The suggested model can be implemented for a day-to-day decision making process by companies oriented to stay competitive in the long run. Besides, the results obtained show the potential for further coordination among the key members of the supply chain in terms of aligning financial, product, and information flows. Despite the fact that the model provides a static solution to the problem of collaborative working capital management, it has potential for the further development of a dynamic algorithm. Future research should seek to investigate the possible imputation options for gained costs reduction values on the grounds of cooperative games with a coalition structure.

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Defined strategies for financial working capital management

Cited by 26 publications

References 31 publications

The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle

The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle

Do Corporate Governance Practices Influence Working Capital Management Efficiency? Evidence From Listed Manufacturing Companies in Sri Lanka

Working Capital Optimization in Supply Chains

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