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Book part
Publication date: 8 April 2024

Markéta Skupieňová, Tetiana Konieva and Ivana Koštuříková

The amount of current assets and the structure of their financing within working capital management define the level of risk, liquidity and profitability of any company. This…

Abstract

The amount of current assets and the structure of their financing within working capital management define the level of risk, liquidity and profitability of any company. This chapter identifies the type of working capital investment and financing policies and reveals their influence on the financial performance of Czech firms.

The type of investment policy was defined, based on the structure of current assets and the working capital-to-sales ratio, followed by the share of different liabilities in assets, used to determine the financing policy. The Orbis database provided the chapter with indexes of manufacturing, agricultural, construction and trade companies for the period of 2012–2021.

The results obtained revealed the liquidity and financial independence of all selected industries. Flexible investment and conservative financing policies in agriculture were accompanied by low profitability. The decrease of the working capital-to-sales ratio and the attraction of the current debts for assets financing provided a higher return on assets in the manufacturing, agricultural and trade sectors.

Details

Modeling Economic Growth in Contemporary Czechia
Type: Book
ISBN: 978-1-83753-841-6

Keywords

Article
Publication date: 22 August 2022

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

Journal of Entrepreneurship in Emerging Economies, vol. 16 no. 2
Type: Research Article
ISSN: 2053-4604

Keywords

Open Access
Article
Publication date: 3 November 2023

Rajesh Desai and Bhoomi Mehta

The present study examines the initial working capital policy (WCP) and its evolution for newly established manufacturing firms.

Abstract

Purpose

The present study examines the initial working capital policy (WCP) and its evolution for newly established manufacturing firms.

Design/methodology/approach

Using panel data of 162 firms over a period of 10 years, the study analyses the persistence-cum-convergence in WCP over the subsequent years through descriptive analysis and difference of means test. Further, the prevalence of ß – convergence, and σ-convergence has been examined using standard least squares regression, dynamic panel analysis and the Wald test.

Findings

The results indicate that sample firms continue to follow the initial WCP in the subsequent years with a gradual convergence in the WCP. Alternatively, the firms with aggressive (conservative) WCP at the time of incorporation will continue following it. Further, the firms with aggressive initial WCP have witnessed higher growth than those with conservative initial WCP.

Research limitations/implications

Findings will assist managers and practitioners to understand the dynamics of WCP over the life cycle of the firm and select appropriate WCP as certain policies lead to certain growth paths.

Originality/value

Though working capital management has been recognized as a critical managerial decision, limited research is available on its evolution, especially for newly established manufacturing companies in an emerging economy. Current research attempts to fill this gap and provide valuable insights for the effective management of liquidity.

Details

Asian Journal of Accounting Research, vol. 9 no. 1
Type: Research Article
ISSN: 2459-9700

Keywords

Article
Publication date: 9 November 2023

Roshan and Niti Nandini Chatnani

This study investigates the relationship between working capital investment (WCI) and firm value for Indian manufacturing firms using excess net working capital (NWC) and Tobin's…

Abstract

Purpose

This study investigates the relationship between working capital investment (WCI) and firm value for Indian manufacturing firms using excess net working capital (NWC) and Tobin's Q as a measure of WCI and firm value, respectively. The study also examines whether firms use the cash released from excess investment in working capital to make long-term investments.

Design/methodology/approach

The sample comprises 834 Bombay Stock Exchange (BSE) listed Indian manufacturing firms whose data from April 2010 to March 2020 are analyzed using a fixed-effect panel regression analysis approach.

Findings

The empirical results show that excess NWC influences firm value negatively and significantly. However, the nature of the relationship becomes nonlinear upon dividing the sample into positive excess NWC and negative excess NWC. The findings from the study also reveal that firms redistribute cash freed from positive excess NWC for long-term investments to improve their value without impacting the corresponding risk.

Practical implications

Overall, the results suggest that firms with positive excess NWC can enhance their valuations by building adequate long-term investments from surplus WCI funds.

Originality/value

To the authors’ best knowledge, studies on this issue have primarily focused on developed economies. No study seems to have been done on this subject in the emerging South Asian economies. The present study is the first to bridge the research gap by investigating the relationship between excess WCI and firm value for manufacturing firms in India. Moreover, it examines whether a positive excess NWC reduction translates into corporate investments (CI).

Details

South Asian Journal of Business Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2398-628X

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Article
Publication date: 19 March 2024

Himanshu Seth, Deepak Deepak, Namita Ruparel, Saurabh Chadha and Shivi Agarwal

This study aims to assess the efficiency of managing working capital in 1,388 Indian manufacturing firms from 2008 to 2019 and investigate the effects of firm-specific and…

Abstract

Purpose

This study aims to assess the efficiency of managing working capital in 1,388 Indian manufacturing firms from 2008 to 2019 and investigate the effects of firm-specific and macro-level determinants on working capital management (WCM) efficiency.

Design/methodology/approach

The current study accommodates a slack-based measure (SBM) in data envelopment analysis (DEA) for computing WCM efficiency. Further, we implement a panel data fixed-effects model that controls for heterogeneity across firms in determining the relationships of selected variables with WCM efficiency.

Findings

The results highlight that manufacturing firms operate at around 50 percent efficiency, which is constant throughout the study period. Furthermore, among the selected variables, yield, earnings, age, size, ability to create internal resources, interest rate and gross domestic product (GDP) significantly affect WCM efficiency.

Originality/value

Instead of the traditional models used for assessing efficiency, the SBM-DEA model is unit-invariant and monotone for slacks, implying that it can handle zero and negative data, which overcomes the incapability of prior DEA models. Hence, this provides accurate efficiency scores for robust analysis. Additionally, this paper provides a holistic working capital model recognizing firm-specific and macro-level determinants for a more explicit estimation of the relationship between WCM efficiency and the selected determinants.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 22 December 2021

Ali Saleh Alarussi and Xiaoyu Gao

This study is conducted to determine the factors that affect profitability in Chinese listed companies (by using financial ratios). Four independent variables liquidity…

2245

Abstract

Purpose

This study is conducted to determine the factors that affect profitability in Chinese listed companies (by using financial ratios). Four independent variables liquidity, intangible assets, working capital and company leverage were empirically tested for their relationships with profitability besides two control variables which are firm size and company efficiency.

Design/methodology/approach

This study used secondary data extracted manually from the annual reports of non-financial Chinese listed companies on the Shanghai stock exchange (http://www.szse.cn/); the data set covers 100 companies during the period of 2017–2019, and a random selection method was used in order to achieve credibility and fairness as much as possible.

Findings

The findings show firm size, working capital and intangible assets have positive and significant relationships with profitability [return on assets (ROA) and earnings per share (EPS)]. Positive working capital is important to lower the cost of capital and improve companies' profitability. Intangible assets are also an essential source to improve profitability due to their low costs. In addition, the findings display a negative and strong relationship between liquidity and profitability, meaning that companies suffer low profit due to inefficient use of liquid items. Interestingly, leverage, which is measured by debt ratio and leverage ratio, shows mixed results; debt ratio shows a positive and strong association with ROA but not with EPS; while leverage ratio displays a strong but negative association with ROA but not with EPS. These results confirm the inverted U-shape relationship between leverage and profitability, which depends on the balance between benefit and cost of debt.

Social implications

Profitability is also important for employees and society where business organization provides sustainability and stability for both of them. Employees can then significantly contribute to achieve higher firm's profitability by efficiently using firm's resources.

Originality/value

This study differs than previous studies in number of aspects: First, this study focuses on financial ratios to explain profitability in Chinese companies. This study provides empirical results about the factors connected to profitability and help stakeholders to make their right decisions. Second, it examines the impact of four independent factors and two control variables that some of them are new in Chinese context such as intangible assets. Third previous studies focus on financial industry such as banks; however, this study focuses on non-financial industry.

Details

International Journal of Emerging Markets, vol. 18 no. 10
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 20 November 2023

Wael Mostafa and Rob Dixon

Recent studies on the securities market’s differential pricing of earnings components have shown that cash flow from operations is more highly valued than total accruals and that…

Abstract

Purpose

Recent studies on the securities market’s differential pricing of earnings components have shown that cash flow from operations is more highly valued than total accruals and that moderate cash flow from operations has higher valuation than extreme total accruals. An interesting question that follows is whether these findings hold regarding the differential valuations of cash flow and current accruals. This study aims to extend prior research by addressing this issue in two ways. First, the authors examine the incremental information content of cash flow from operations beyond working capital from operations. Second, the authors assess the effect of extreme working capital from operations on the incremental information content of cash flow from operations. This study aims to extend prior research by addressing this issue in two ways.

Design/methodology/approach

This study adopts market-based accounting research to test its hypotheses and to achieve its objectives. Specifically, this study uses statistical associations between accounting data and stock returns to examine the incremental information content (value relevance) of cash flow and working capital from operations and the effect of extreme working capital from operations on the incremental information content of cash flow.

Findings

The results show that cash flow from operations is not more highly valued than current accruals (both being valued equivalently). However, moderate cash flow from operations has higher valuation than extreme current accruals (each is valued differently). Overall, these research findings indicate that cash flow becomes more important for valuation as accruals get “extreme”.

Practical implications

As accruals are unlikely to persist to be permanent across the years, these results can be interpreted as indicating that cash flow and accruals information are used jointly by investors, with one being more important than the other depending on the relative “extremeness” of each. Therefore, both are of value to the investor and both should be reported.

Originality/value

The paper contributes to the UK research on determining the preferred level of disaggregation of earnings components, i.e. operating cash flow, current accruals and non-current accruals. This would help investors to improve their investment and credit decisions.

Open Access
Article
Publication date: 29 February 2024

Frank Nana Kweku Otoo

Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management…

Abstract

Purpose

Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management practices on organizational performance of small- and medium-scale enterprises.

Design/methodology/approach

Data were collected from 45 small-sized and 72 medium-sized firms. Data supported the hypothesized relationships. Construct reliability and validity were established through confirmatory factor analysis. The conceptual model and hypotheses were evaluated by using structural equation modeling.

Findings

The results indicate that working capital significantly influenced organizational performance. Capital budget management significantly influenced organizational performance. A non-significant influence of asset management on organizational performance was observed.

Research limitations/implications

The generalizability of the findings will be constrained due to the research’s SMEs focus and cross-sectional data.

Practical implications

The study’s findings will serve as valuable pointers for stakeholders and decision-makers of SMEs in the development of well-articulated and proactive financial management systems to ensure competitiveness, sustainability, viability and financial competences.

Originality/value

The study adds to the corpus of literature by evidencing empirically that financial management practices significantly influenced SMEs’ performance.

Details

Vilakshan - XIMB Journal of Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0973-1954

Keywords

Open Access
Article
Publication date: 20 December 2023

Irfana Rashid and Faseeh Amin

The main aim of this study is to highlight the significance of fostering social capital and improving the quality of work life (QWL) for the well-being of healthcare workers. The…

Abstract

Purpose

The main aim of this study is to highlight the significance of fostering social capital and improving the quality of work life (QWL) for the well-being of healthcare workers. The second objective of this research is to address a notable gap in the current knowledge by examining the mediating influence of QWL on the relationship between work-related social capital and life satisfaction within the healthcare profession.

Design/methodology/approach

This study used a cross-sectional research methodology to examine the complex relationships among the variables and included a sample of 330 individuals who are employed full-time in the healthcare profession in the North Indian Region.

Findings

The study confirms all research hypotheses, showing that social capital improves work life. Thus, work-life quality improves life satisfaction significantly. The mediation analysis in this study used bootstrapping to show that work-life quality mediates the association between social capital and life satisfaction.

Practical implications

Addressing social support issues and using effective human resource management tactics can improve employees’ work life and satisfaction. The findings are essential in collectivistic cultures because strong workplace relationships improve professional welfare.

Originality/value

This study differentiates itself by analysing social capital and QWL as multi-dimensional constructs inside the workplace, ensuring the results’ correctness and validity. This study provides a distinct viewpoint for scholars and practitioners, enhancing comprehension of the correlation between life satisfaction and work-related social capital within the healthcare industry.

Details

Arab Gulf Journal of Scientific Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-9899

Keywords

Book part
Publication date: 12 December 2023

Floris de Krijger

A growing body of research finds that gig economy platforms use gamification to enhance managerial control. Focusing on technologically mediated forms of gamification, this…

Abstract

A growing body of research finds that gig economy platforms use gamification to enhance managerial control. Focusing on technologically mediated forms of gamification, this literature reveals how platforms mobilize gig workers’ work effort by making the labour process resemble a game. This chapter contends that this tech-centric scholarship fails to fully capture the historical continuities between contemporary and much older occurrences of game-playing at work. Informed by interviews and participatory observations at two food delivery platforms in Amsterdam, I document how these platforms’ piece wage system gives rise to a workplace dynamic in which severely underpaid delivery couriers continuously employ game strategies to maximize their gig income. Reminiscent of observations from the early shop floor ethnographies of the manufacturing industry, I show that the game of gig income maximization operates as an indirect modality of control by (re)aligning the interests of couriers with the interests of capital and by individualizing and depoliticizing couriers’ overall low wage level. I argue that the new, algorithmic technologies expand and intensify the much older forms of gamified control by infusing the organizational activities of shift and task allocation with the logic of the piece wage game and by increasing the possibilities for interaction, direct feedback and immersion. My study contributes to the literature on gamification in the gig economy by interweaving it with the classic observations derived from the manufacturing industry and by developing a conceptualization of gamification in which both capital and labour exercise agency.

Details

Ethnographies of Work
Type: Book
ISBN: 978-1-83753-949-9

Keywords

1 – 10 of over 8000