Efficient working capital management, financial constraints and firm value: A text-based analysis

Dhole, Sandip; Mishra, Sagarika; Pal, Ananda Mohan

doi:10.1016/j.pacfin.2019.101212

Cited by 57 publications

(53 citation statements)

References 47 publications

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“…Since working capital management has always been a big concern, much attention has been drawn to this field in recent decades (Chen and Kieschnick, 2018;Pirttilä et al, 2019;Jędrzejczak-Gas, 2017;Dhole, Mishra and Pal, 2019). It is proved that working capital policy can affect the efficiency of the firm's operation, which impacts on the possibility of gaining profit (Deloof, 2003).…”

Section: Introductionmentioning

confidence: 99%

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

Pham¹,

Huynh²

2020

Acta Univ. Agric. Silvic. Mendelianae Brun.

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The aim of this study is to examine the effect that trade credit investment has on firms' profitability. The characteristics of this relationship have not been dealt with in depth for manufacturing firms. We use panel data for a total of 227 Vietnamese publicly listed manufacturing firms for the period 2005–2017. Different econometric estimation techniques such as the feasible generalized least squares, fixed effects and random effects and different calculation of firm performance such as non market-based measure (return on assets) and market-based measure (Tobin's q) are employed to validate the consistent results. The robust results confirm a statistically significant inverted U-shaped relationship between trade credit investment and profitability.

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Section: Introductionmentioning

confidence: 99%

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

Pham¹,

Huynh²

2020

Acta Univ. Agric. Silvic. Mendelianae Brun.

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“…Working capital management is important because it enables enterprises to free up cash and improve liquidity (Dhole et al 2019). K. Smith suggests that working capital decisions affect the efficiency and effectiveness of a company (Smith 1980).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Some enterprises start operating together in the market within multi-stakeholder organizations. This cooperation allows enterprises to raise the level of net working capital (Zimon 2018;Dhole et al 2019). There are enterprises that introduce quality management systems to improve the management of individual elements affecting the amount of working capital.…”

Section: Introductionmentioning

confidence: 99%

Quality Management Systems and Working Capital SMEs in GPO—A Case of Poland

Zimon

2020

Administrative Sciences

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Working capital is designed to provide enterprises with financial security. Its level depends on the strategy of managing individual elements of working capital. An appropriate management strategy allows companies to obtain added working capital. Working capital management is a difficult process as it concerns both current assets and current liabilities. Therefore, company managers are constantly looking for solutions, methods and tools that will help them to manage their working capital. A quality management system is the one that facilitates control over the management of individual elements that create net working capital. The introduction of appropriate procedures derived from quality management systems in specific areas is a great support for creating a positive net working capital. The aim of this paper is to show how the introduction of quality management systems can positively affect the level of working capital. The article presents how quality management systems allow for optimizing the level of individual components, creating a positive net working capital. The research was carried out on a group of 102 Polish small trading companies operating in the same industry. The enterprises were divided into two groups of companies applying the quality management system and of those that did not use such systems. Based on the financial statements for the years 2017–2019 and by means of appropriately selected financial ratios, an analysis of the impact of quality management systems on net working capital was carried out. The results in some areas of management of individual components of net working capital in different groups of enterprises were compared. The research was carried out with the application of appropriate statistical methods. The analysis showed that enterprises using quality management systems managed working capital more efficiently. In the literature, the subject of the impact of quality management systems on working capital is not popular. This paper may be a source for further, extended research and considerations regarding the impact of quality management on the level of working capital in enterprises.

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“…Furthermore, research conducted on non-financial micro-firms in the UK from 2004 to 2013 discovered that by observing the optimal level of investment in NWC, firm value would increase along with the level of NWC (Afrifa, 2016). In addition, companies that could manage NWC efficiently could increase firm value and reduce future financial constraints (Dhole et al, 2019). Further research conducted on the non-financial industry in India obtained a result in the form of an inverted U, which meant that the NWC would affect firm value at a certain point (Ahangar & Shah, 2017;Altaf & Ahmad, 2019).…”

Section: Introductionmentioning

confidence: 99%

Firm's Value Exploration: The Impact Of Intellectual Capital and Net Working Capital

Lestari

Suryani

2020

jda

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Intellectual capital (IC) gains more importance nowadays, and hence, this study investigates the impact of IC and net working capital (NWC) on firms’ values creation. If IC has a greater impact than NWC, it indicates that automotive and components companies in Indonesia have paid attention to IC's contribution to increase company value. This study was conducted on 15 automotive and components companies from 2011 to 2018 as this industry utilises more IC and NWC than any other industries. We used panel data regression analysis with random effect model to test the hypothesis of 92 data, with IC calculated through the MVAIC model, and firm’s value is measured by Tobin’s Q. The results show that IC has no significant effect on firms’ value. Meanwhile, NWC has a significant negative effect on firms’ values creation. These important findings suggest that automotive and components firms should apply strategic management in managing IC and NWC to increase the firm’s value.

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Efficient working capital management, financial constraints and firm value: A text-based analysis

Cited by 57 publications

References 47 publications

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

Quality Management Systems and Working Capital SMEs in GPO—A Case of Poland

Firm's Value Exploration: The Impact Of Intellectual Capital and Net Working Capital

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