Integrated Corporate Governance Model Innovation for Working Capital Management

Abstract

Working capital management is a short-term investment decision funded by current liabilities consisting of interrelated components, namely: cash, receivables, securities and inventories, that have different agency relationships yet interrelated. Until recently corporate governance was not integrated, so it was not effective in increasing companies' liquidity and profitability. The purpose of this study is to develop an integrated corporate governance framework model innovation for working capital management. This research was conducted by reviewing articles related to corporate governance and working capital management, finding gaps among them, and identifying their limitations. The results show that the integrated corporate governance model innovation for working capital management is able to determine the composition of optimal working capital so as to increase liquidity, profitability, and reduce business risk. This research, theoretically, develops agency theory and good corporate governance model in managing working capital and, practically, provides information for managers and investors in short term investment decisions and financing decisions.

The Impact of Corporate Governance on Accounting Information System and Credit Risk: A Literature Review

“…Corporate governance can increase the confidence of creditors in companies. The quality of components is determined by internal components for corporate governance execution (Mutamimah, 2020). Corporate governance in companies can decrease the risk of debt effectively.…”

“…(Lusardi & Scheresberg,2013) Stated that financial literacy can limit loan expenses and those who have information and knowledge, understanding, and abilities of financial administration in estimating, examining, choosing, comparing, and choosing various types of credit will get excellent credit to improve the expense of debt. Moreover, if the manager doesn't have the information and abilities of financial administration in calculating, analyzing, choosing, comparing, and picking different kinds of credit presented by different financial organizations, then they will get bad quality credit, so the expense of debt is enormous (Mutamimah, et al, 2020). This is explained by Fatoki (2014), who assumed that the financial literacy of business managers allows them to pursue exact and productive financial decisions.…”