Search results

This research investigates (1) the impacts of working capital investment policy and working capital financing policy on firms’ performances (profitability and market value) and (2) the impact of profitability on market value. Data are gathered from 68 companies listed in the Stock Exchange of Thailand covering production sector. Data collected from 2012 to 2016 are analyzed using path analysis to measure the impacts of working capital policy on performances and examine the consistency of the model and the empirical data.

The model is found to be consistent with the empirical data; the probability level is 0.085, χ ²/df is 2.96, CFI is 0.951, GFI is 0.979, IFI is 0.957, and RMR is 0.004. The result reveals a statistically significant positive relationship between working capital investment policy and profitability. In addition, working capital investment policy affects market value through profitability as a mediator variable. However, there are significant negative impacts of working capital financing policy on profitability and market value. Overall, it can be implied that companies which adopt conservative working capital investment policy and conservative working capital financing policy can increase their profitability and market value.

The purpose of this paper is to examine the relationship between working capital financing and firm performance for a sample of 437 non-financial Indian companies. In addition, this study examines the impact of financial constraints on working capital financing–performance relationship.

The study is based on secondary financial data of 437 non-financial Indian companies obtained from Capitaline database, pertaining to a period of 10 years (2007–2016). This study employs two-step generalized method of moments techniques to arrive at results.

Results of the study confirm the inverted U-shape relationship between working capital financing and firm performance. In addition, the authors also found that the firms that are likely to be less financially constrained can finance greater proportion of working capital using short-term debt.

This study contributes to the scant existing literature by testing the impact of financial constraints on the relationship between working capital financing and firm performance, representing a typical emerging market in India.

The purpose of this paper is to provide empirical evidence about the relationship between working capital financing (WCF) and firm profitability in six key manufacturing sectors of Indian Economy. It also aims to capture the change in the financing of working capital requirement over different scenarios of price-cost margin and financial flexibility.

The study is undertaken on a sample of 1,211 firms from 6 key manufacturing sectors of Indian economy from 2000 to 2016. The non-linear relationship between WCF and profitability is studied using two-step generalized model of moments (GMM) estimator.

The study finds a convex relationship between WCF and profitability among firms in chemical, construction, and consumer goods sectors. Firms in these sectors can finance larger portion of their working capital requirements through short-term debt without negatively impacting profitability. However, a concave pattern of relationship for firms in machinery, metal, and textile industries implies increasing debt financing of working capital requirement would increase profitability for the firms who have financed lower portion of their working capital by short-term bank borrowing. But when a higher proportion of working capital requirements are already financed by short-term debt, a further increase in debt financing may impact profitability negatively. Moreover, the study finds that firms with high financial flexibility and high price-cost margin (except textile) can increase profitability by financing larger portion of working capital requirement through short-term debts and the continuation with risky WCF could increase profitability.

The study contributes to the literature on working capital in a number of ways. First, no previous study has been undertaken to explore the non-linear relationship between WCF and corporate profitability over a large sample of firms from six key manufacturing sectors of Indian economy. Second, the study uses a quadratic function to explore the non-linear relationship between WCF and profitability. Third, the study explores the relationship between WCF and profitability with respect to the price-cost margin and financial flexibility of firms under different manufacturing sectors of Indian economy. Finally, the study uses advanced two-step GMM, the panel data techniques to handle unobservable heterogeneity and issues of endogeneity within the data sample.

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.

Sees the objective of teaching financial management to be to help managers and potential managers to make sensible investment and financing decisions. Acknowledges that financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, financial statement planning and ratio analysis. Seeks to combine the practical rules of thumb of the traditionalists with the ideas of the financial theorists to form a balanced approach to practical financial management for MBA students, financial managers and undergraduates.

The present study aims to investigate the impact of working capital management (WCM) practices on the investment and financing patterns of listed nonfinancial companies in Pakistan for a span of 10 years.

The study is based on secondary financial data of 354 listed nonfinancial Pakistani firms during the period of 2005–2014. The two-step generalized method of moment (GMM) regression estimation technique is employed to ensure the robustness of results.

Empirical testing reveals that: excessive funds tied up in working capital have a negative impact on the investment portfolio of sample firms. Besides, a negative relationship between change in fixed assets and excess net working capital posits that, eventually, firms use idle resources tied up in short-lived assets to boost their investment activities. Furthermore, larger working capital levels were associated with higher leverage ratio which indicates that firms with inefficient WCM policies have to rely heavily on long-term debt to meet their short-term financing requirements. Additional results indicate that firms that take more time to sell inventory and convert receivables to cash, make more use of debt. Results of cash management models illustrate that cash-rich firms have lower leverage levels which signal the strong financial health and internal revenue generation capability of such firms.

There is a dearth of empirical studies that examine the implications of WCM decisions on a firm's capital structure. Besides, these studies are only confined to how a WCM policy influences the long-term investment activities of a firm. The research contributes to the extant literature by empirically revealing a link between the WCM practices and the firm's long-range investment and financing patterns. Hence, financial managers shall account for the impact of their short-term financial management decisions on the capital structure of the firm.

This paper aims to assess how Sharīʿah guidelines improve the working capital needs of the Indian sugar industry. Previous studies reveal that the sugar industry in India is in a state of cash deprivation for decades. Finance is not available for expansion, as well as for working capital requirements. Banks have also declined to provide working capital loans to the sugar industry.

Lack of working capital management and its impact upon sugar mills profitability are examined based on a sample of six Indian sugar mills and the use of panel data analysis for the period 2011-2015.

The regression results suggest the need for reducing the number of days’ account receivables and inventories to a reasonable minimum to maintain the liquidity necessary for the mills, which current mills cannot manage to achieve, and consequently, suffer liquidity problems.

This paper presents a model of Sharīʿah-compliant working capital financing for cash deprived Indian sugar industry. All the three parties stand to benefit from this arrangement: the farmer will get the price of his crop promptly and at its farmland, sugar mill will secure the required quantity of raw material (sugarcane) without any immediate cash outflow, and the Islamic bank will earn a reasonable mark-up profit from this transaction.

The study is the first comprehensive effort to explore the possible combination of Islamic banking products subject to the fulfillment of needs of sugar mills and farmers and the application of an Islamic banking instrument in the agriculture sector of India. It also suggests the possible models for financing under a Salam and Murabahah contract.

The purpose of this paper is to examine the relationship between working capital efficiency and firm value and the influence of financing constraints on this relationship.

Data from 192 firms spanning a period of ten years (1999-2008) are used for this purpose and analyzed using the ordinary least squares regression technique.

The study finds that improvements in working capital efficiency through reduction in working capital investment results in higher firm value. However, this relationship is influenced by the financing constraints faced by a firm. For financially constrained firms, working capital efficiency significantly increases firm value but it is found to be insignificant for unconstrained firms.

To the author’s knowledge, this is the first study on the value of working capital in Malaysia or in any emerging market. Most studies on working capital valuation concentrate on developed countries and that too are only a handful. Hence this study contributes to the scarce literature on the valuation of working capital. This study also uses the model by Fama and French (1998) to evaluate the relationship between working capital and firm value, which has hardly been used in studies on working capital valuation.

This study examines the impact of firm-specific and macroeconomic factors on the working capital behavior of firms listed in the Middle East and North African (MENA) region.

This study is based on a panel data analysis of 687 firms listed on 11 MENA markets, carried out using the Generalized Method of Moments (GMM) approach.

The results of this study reveal that profitable firms with high levels of operating cash flows adopt a conservative working capital management. Young firms with rapid growth rates, highly leveraged firms and firms with large investments in fixed assets have higher liquidity needs, which explains their tendency to pursue aggressive working capital strategies. Similarly, large firms exercise their bargaining power over their clients and suppliers to implement an aggressive approach of working capital management. Finally, firms do not have the luxury to decide how working capital should be managed when they are subject to outside macroeconomic forces that affect their stakeholders as well.

The findings of this study can help managers adopt efficient practices and identify optimal working capital levels. Firms in the MENA region maintain excess reserves of cash, which causes under-investment and inefficient allocation of resources in the economy. Improving working capital management practices can allow firms to regain operational efficiency, enhance financial performance and support economic growth.

To the best of the authors' knowledge, this study investigates this topic in MENA emerging markets and contributes to enriching the existing corporate finance literature in emerging markets.

Research on financing for entrepreneurship has consolidated over the last decade. However, one question remains unanswered: how does the combination of external finance, such as equity and debt capital, and internal finance, such as working capital, affect the likelihood of grant funding over time? The purpose of this study is to analyse the relationship between different sources of financing and firms' ability to fundraise via innovation grants and to examine the role of female chief executive officer (CEO) in this relationship. Unlike equity and debt funding, innovation grants manifest a form of innovation acknowledgement and visibility, recognition of potential commercialization of inovation.

The authors use firm-level financial data for 3,034 high-growth firms observed in 2015, 2017 and 2019 across 35 emerging sectors in the United Kingdom (UK) to test the factors affecting the propensity of high-growth firms to secure an innovation grant as a main source of fundraising for innovation during the early stages of product commercialization.

The results do not confirm gender bias for innovation fundraising in new industries. This contrasts with prior research in the field which has demonstrated that access to finance is gender-biased. However, the role of CEO gender is important as it moderates the relationship between the sources of funding and the likelihood of accessing the grant funding.

This study does not analyse psychological or neurological factors that could determine the intrinsic qualities of male and female CEOs when making high-risk decisions under conditions of uncertainty related to innovation. Direct gender bias with regards to access to innovation grants could not be assumed. This study offers important policy implications and explains how firms in new industries can increase their likelihood of accessing a grant and how CEO gender can moderate the relationship between availability of internal and external funding and securing a new grant.

This study implicates and empirically demonstrates that gender bias does not apply in fundraising for innovation in new industries. As female CEOs represent various firms in different sectors, this may be an important signal for investors in new product development and innovation policies targeting gender bias and inclusion.

The authors draw on female entrepreneurship and feminist literature to demonstrate how various sources of financing and gender change the likelihood of grant funding in both the short and long run. This is the first empirical study which aims to explain how various internal and external sources of finance change the propensity of securing an innovation grant in new industries.