Influence on Corporate Performance by Determinants of Working Capital

Abstract

Working capital (WC) determinants play a crucial role in operating activities and corporate performance in a routine firm. This paper examines the influence of WC determinants on corporate performance employing a sample of thirty-one metal and mining firms listed on the National Stock Exchange (NSE), India for 10 years from 2010-2019. Pearson's correlation and fixed effect regression models were used to estimate the explanatory variables regression coefficients on the outcome variables. ROTA, ROEQ and ROCE variables were used to ascertain performance of sample firms and results revealed a significant negative influence of WCinventory period (INVP) and accounts receivable collection period) on corporate performance (ROTA,ROEQ & ROCE). No significant influence was observed between Corporate performance (ROTA, ROEQ & ROCE) and account Payable (AP). Moreover, Control variables corporate size (CZ) results revealed significant negative influence on corporate performance (ROTA,ROEQ & ROCE), & Debt ratio(DR) result revealed a negative significant influence on ROTA, ROEQ .The result of sales Growth (SG) indicated a positive significant influence of corporate performance (ROTA,ROEQ & ROCE). From the result of this study, it has been inferred that by reducing the INVP & ARCP the management can enhance corporate performance & eventually creating value for firm's shareholders. Through a meticulous reduction of the inventory period (INVP) & account receivable collection period (ARCP), firms can demonstrate the effective and efficient utilization of financial resources, mitigating default & liquidity risk thereby enhancing its profit. Thus, systematic utilization of working capital elements positively influences firm's performance.

The Performance Measurement of Generalized Sharpe Ratio and Economic Performance Measure: A Hedge Funds Example

“…Thus, we suggest that, for performance evaluation, the GSR(P-Z) and the EPM(P) should be used with caution. Our results align with [4,5,6,15,20] 128…”