Search results
1 – 10 of over 106000Robert F. Lusch and James M. Kenderdine
Between 1970 and 1976 the competitive and economic environment in which retailers operated experienced a turbulence unprecedented in recent history. During this period the…
Abstract
Between 1970 and 1976 the competitive and economic environment in which retailers operated experienced a turbulence unprecedented in recent history. During this period the compression of institutional life cycles coupled with dramatic shifts in consumer life styles plagued many retailers. In addition, a web of other factors, such as steadily increasing interest rates and inflation, a heightening of inter‐type competition and the competitive entry pressure created by a large inventory of vacant retail space, made it increasingly difficult to both assess and predict the environment. These environmental conditions have intensified pressures on retailers to improve their profit performance, both to insure survival in an increasingly uncertain environment and to provide a basis for future growth. At the same time, these conditions have exacerbated the retailer's problems in trying to obtain new capital. Unable to generate sufficient capital internally to finance both market repositioning and new growth, retailers have found themselves in many instances unable to afford the costs of new debt (if indeed they had the capacity to support it). At the same time, investor uncertainty, regarding both the future and the ability of retailers to adapt to it, has reduced the flow of new equity capital into retailing to a bare trickle. In short, retailers during this period have recognised the critical need to manage capital more efficiently.
The article analyses the “pros” and “cons”of different strategies to be adopted to manage and avoid workingcapital crisis situations in any organisation. The working…
Abstract
The article analyses the “pros” and “cons” of different strategies to be adopted to manage and avoid working capital crisis situations in any organisation. The working capital position depends on many organisational parameters which are interrelated and interdependent, and also vary over time. In such a situation, the use of a system dynamics approach has been advocated to reflect the relevant dynamic cause‐and‐effect relationships for the development of appropriate long‐term and short‐term strategies.
Details
Keywords
Over the past 40 years major theoretical developments have occurred in the areas of longer‐term investment and financial decision making. Many of these new concepts and the…
Abstract
Over the past 40 years major theoretical developments have occurred in the areas of longer‐term investment and financial decision making. Many of these new concepts and the related techniques are now being employed successfully in industrial practice. By contrast, far less attention has been paid to the area of short‐term finance, in particular that of working capital management. Such neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience shows that inadequate planning and control of working capital is one of the more common causes of business failure.
Details
Keywords
The article highlights potential mismeasurement in working capital allocations among academicians and practitioners and revisits the relationship between firms' working capital…
Abstract
Purpose
The article highlights potential mismeasurement in working capital allocations among academicians and practitioners and revisits the relationship between firms' working capital and productivity, as evident from their values.
Design/methodology/approach
The research design acknowledges the relative role of firms' working capital vis-a-vis other assets in generating revenue, thereby effectively accounting for the overall asset efficiency in influencing firm value. The authors use a multivariate framework to draw inferences from the marginal impact of working capital and its components on firm value while controlling for asset utilization.
Findings
The authors find that, after accounting for asset utilization, the marginal impact of working capital and its components on firm value is quite weak. The results are consistent with the hypothesis that firms' trade-off between short-term and long-term assets per se should not have any value implications. After controlling for their asset turnovers, the authors find that higher allocations to working capital relative to other assets are not necessarily value-destructive. The findings contrast with the past literature.
Research limitations/implications
The article, through its analytical and empirical insights, suggests that working capital allocations should be measured by managers and academicians relative to firms' other asset rather than their sales. Firm values should, therefore, be compared based on firms' overall asset utilization rather than inter-temporal allocations to short-term versus long-term assets.
Originality/value
Contrary to the existing literature so far, the article explicitly acknowledges the relative role of firms' other assets, and hence the overall asset utilization, to infer the marginal impact of working capital on firm value.
Details
Keywords
The purpose of this paper is to empirically analyze and identify key factors affecting working capital behavior of companies listed on the Egyptian Stock Exchange.
Abstract
Purpose
The purpose of this paper is to empirically analyze and identify key factors affecting working capital behavior of companies listed on the Egyptian Stock Exchange.
Design/methodology/approach
Working capital requirement and cash conversion cycle were used to proxy working capital behavior. The study explored nine main factors widely discussed in previous research to explain working capital behavior: operating cash flow, growth opportunities, performance, firm value, age, size, leverage, economic conditions and industry type. The study employed a panel data analysis for 68 listed Egyptian industrial firms for the period 2000–2010. Different techniques of the generalized method of moments were used to test the validity of the research hypotheses.
Findings
The results show that working capital behavior is affected by various factors related to firm characteristics, economic conditions and industry type.
Originality/value
This study provides financial managers with a better understanding of the impact of different internal and macroeconomic factors on working capital behavior in an emerging market, such as Egypt’s.
Details
Keywords
Oscar F. Briones, Segundo M. Camino-Mogro and Veronica J. Navas
The purpose of this research is to examine Micro-, small- and medium-sized enterprises (MSMEs). Which have limited access to financial resources from financial intermediaries…
Abstract
Purpose
The purpose of this research is to examine Micro-, small- and medium-sized enterprises (MSMEs). Which have limited access to financial resources from financial intermediaries. Thus, resource allocation is a primary concern for them.
Design/methodology/approach
This research studies the determinants of cash conversion cycle components and cash flow of MSMEs operating in Ecuador. This study examined a robust sample of 19,680 firms from 2000 to 2020, using the two-step generalized methods of moments to control for endogeneity and multicollinearity of independent variables issues.
Findings
The sample was divided into working capital intensive and fixed capital intensive firms. It was found that in every segment (micro-, small- and medium-sized), the majority of firms are working capital intensive and their average return is higher. This implies that small business owners assign the majority of their resources to current assets, which thus far have enabled them to achieve higher profitability.
Originality/value
Research investigated Ecuadorian MSMEs in a dollarized developing environment. Scrutinizing working capital intensive vs fixed capital intensive.
Details
Keywords
Himanshu Seth, Saurabh Chadha and Satyendra Sharma
This paper evaluates the working capital management (WCM) efficiency of the Indian manufacturing industries through data envelopment analysis (DEA) and empirically investigates…
Abstract
Purpose
This paper evaluates the working capital management (WCM) efficiency of the Indian manufacturing industries through data envelopment analysis (DEA) and empirically investigates the influence of several exogenous variables on the WCM efficiency.
Design/methodology/approach
WCM efficiency was calculated using BCC input-oriented DEA model. Further, the panel data fixed effect model was used on a sample of 1391 Indian manufacturing firms spread across nine industries, covering the period from 2008 to 2019.
Findings
Firstly, the WCM efficiency of Indian manufacturing industries has been stable over the analysis period. Secondly, the capacity to generate internal resources, size, age, productivity, gross domestic product and interest rate significantly influence WCM efficiency.
Research limitations/implications
First, the selected study period has observed various economic uncertainties including demonetization and recession, so the scenario might differ in normal conditions or country-wise. Second, the findings might not be generalizable to the developed economies, since the current study sample belongs to a developing economy, which further provides scope for comparative study.
Practical implications
An efficient model for managing the working capital comprising most vital determinants could enhance the firms' valuation and goodwill. Also, this study would be helpful for financial executives, manufacturers, policymakers, investors, researchers and other stakeholders.
Originality/value
This study estimates the industry-wise WCM efficiency of the Indian manufacturing sector and suggests measures to the concerned parties on areas to focus on and provide evidence on the estimated relationships of firm-level and macroeconomic determinants with WCM efficiency.
Details
Keywords
Anna-Maria Talonpoika, Sari Monto, Miia Pirttilä and Timo Kärri
The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a…
Abstract
Purpose
The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a modification of this measure that takes into account advance payments as a component of operational working capital.
Design/methodology/approach
A new measure, the modified cash conversion cycle (mCCC) is introduced and tested with empirical data of companies in Helsinki Stock Exchange.
Findings
The mCCC reveals the real efficiency of operational working capital in companies that receive advance payments to a remarkable extent.
Research limitations/implications
The mCCC can be used in empirical analysis in academic studies. In this paper, the empirical data are used only for testing the mCCC. The paper concerns received advance payments, but the mCCC can also be extended also to other components of operational working capital ignored by the traditional CCC.
Practical implications
The paper offers insights into the variations of CCC for class teachers, and business practitioners, particularly financiers, who deal with operational working capital, cash flow predictions and calculations.
Originality/value
There are current items that may have a remarkable effect on operational working capital, but traditionally only inventories, accounts receivable and accounts payable are discussed. The authors argue that also other current items should be taken into account, if they affect the efficiency of operational working capital. The new mCCC is encouraged to be used instead of the CCC when observing working capital management.
Details
Keywords
Himanshu Seth, Saurabh Chadha, Satyendra Kumar Sharma and Namita Ruparel
This study develops an integrated approach combining data envelopment analysis (DEA) and structural equation modeling (SEM) for estimating the working capital management (WCM…
Abstract
Purpose
This study develops an integrated approach combining data envelopment analysis (DEA) and structural equation modeling (SEM) for estimating the working capital management (WCM) efficiency and evaluating the effects of diverse exogenous variables on the WCM efficiency and firms' performance.
Design/methodology/approach
DEA is applied for deriving WCM efficiency for 212 Indian manufacturing firms over a period from 2008 to 2019. Also, the effect of human capital (HC), structural capital (SC), cost of external financing (CEF), interest coverage (IC), leverage (LEV), net fixed asset ratio (NFA), asset turnover ratio (ATR) and productivity (PRD) on the WCM efficiency and firms' performance is examined using SEM.
Findings
The average mean efficiency scores ranging from 0.623 to 0.654 highlight the firms operating at around 60% of WCM efficiency only, which is a major concern for Indian manufacturing firms. Further, IC, LEV, NFA, ATR revealed direct effect on the WCM efficiency as well as indirect effect on firms' performance, whereas CEF had only a direct effect on WCM efficiency. HC, SC and PRD had no effects on WCM efficiency and firms' performance.
Practical implications
The findings offer vital insights in guiding policy decisions for Indian manufacturing firms.
Originality/value
This study is the first to identify the endogenous nature of the relationship of HC, SC, CEF, IC altogether with firms' performance, compounded by the WCM efficiency, by applying a comprehensive methodology of DEA and SEM and provides an efficiency performance model for better decision-making.
Details
Keywords
VELLANKI S.S. KUMAR, AWAD S. HANNA and TERESA ADAMS
The systematic assessment of working capital requirement in construction projects deals with the analysis of various quantitative and qualitative factors in which information is…
Abstract
The systematic assessment of working capital requirement in construction projects deals with the analysis of various quantitative and qualitative factors in which information is subjective and based on uncertainty. There exists an inherent difficulty in the classical approach to evaluate the impact of qualitative factors for the assessment of working capital requirement. This paper presents a methodology to incorporate linguistic variables into workable mathematical propositions for the assessment of working capital using fuzzy set theory. This article takes into consideration the uncertainty associated with many of the project resource variables and these are reflected satisfactorily in the working capital computations. A case study illustrates the application of the fuzzy set approach. The results of the case study demonstrate the superiority of the fuzzy set approach to classical methods in the assessment of realistic working capital requirements for construction projects.
Details