The impact of corporate governance on working capital management efficiency of American manufacturing firms

Abstract

Purpose -The purpose of this study is to investigate the impact of corporate governance on working capital management efficiency. This study also seeks to extend the findings of Gill and Shah. Design/methodology/approach -This study applied a co-relational research design. A sample was selected of 180 American manufacturing firms listed on the New York Stock Exchange (NYSE) for a period of 3 years (from 2009-2011). Findings -The findings of this study indicate that corporate governance plays some role in improving the efficiency of working capital management. Research limitations/implications -This is a co-relational study that investigated the association between corporate governance and working capital management efficiency. There is not necessarily a causal relationship between the two, although the paper provides some conjectures to the findings. The findings of this study may only be generalized to firms similar to those that were included in this research. Originality/value -This study contributes to the literature on the factors that improve the efficiency of working capital management, and in particular on the association between several features of corporate governance and the efficiency of working capital management. The findings may be useful for financial managers, investors, financial management consultants, and other stakeholders.

Corporate Governance and Cash Holdings: Empirical Evidence from an Emerging Country, Sri Lanka

“…CH is used as proxy to calculate the amount of cash and size of the board; board composition; CEO duality; gender diversity; board meetings are explanatory variable as a proxy of CHPs and firm size; sales growth and firm performance are used as explanatory variables which are similar to those used by Gill and Biger (2013); Velnampy (2013) and Kajananthan and Achchuthan (2013).…”

“…Gill and Mathur (2011) and Gill and Shah (2012) investigated the impact of CEO duality and board size on cash holdings and corporate liquidity by collecting data from Canadian firms. Gill and Biger (2013) examined the impact of CEO duality, board size, CEO tenure and audit committee on CH by using data from American manufacturing firms, yet not detailed research work has been done especially among SARC countries firms. Following Gill and Biger (2013), this study used board size, board independence, CEO duality, gender diversity and board meetings as the CGPs.…”

“…Gill and Biger (2013) examined the impact of CEO duality, board size, CEO tenure and audit committee on CH by using data from American manufacturing firms, yet not detailed research work has been done especially among SARC countries firms. Following Gill and Biger (2013), this study used board size, board independence, CEO duality, gender diversity and board meetings as the CGPs. The data was obtained from annual report of each company listed at Colombo Stock Exchange (CSE), Sri Lanka.…”

Corporate Governance and Cash Conversion Cycle: Evidence from Listed Companies in Sri Lanka

“…Particularly, the WCM requires a tradeoff between risk and return; higher risk and higher return are related with aggressive working capital management while the lower risk and lower return are allied with conservative working capital management (Afza and Nazir, 2007). The people in the corporate board are accountable for formulating different types of policies related to short term as well as long term in the company where weak policies related to working capital components, such as trade receivable, trade payable and inventory management have an adverse effect on the CCC (Gill and Biger, 2013). The conflict of interest between managers and shareholders could have an effect on working capital level (Jensen and Meckling, 1976).…”

“…The elements of the CCC include trade receivable days, trade payable days and inventory days (Gill and Biger, 2013). Shortening the CCC days plays significant part in firming short solvency by enhancing cash flows of operation; or the ability of the company to satisfy short-term as well as long-term financial obligations.…”