Do Firms Approach the Target Working Capital Requirement? A Case of Pakistan

2018 ◽  
Author(s):  
Ruqia Shaikh ◽  
Guo Fei ◽  
Pervez Ahmed Memon ◽  
Muhammad Shaique
Keyword(s):  
Capital Requirement ◽  
Working Capital

scholarly journals FINANCING OF WORKING CAPITAL REQUIREMENT, FINANCIAL FLEXIBILITY AND SME PERFORMANCE

2016 ◽  
Vol 17 (6) ◽  
pp. 1189-1204 ◽  
Author(s):  
Sonia BAÑOS-CABALLERO ◽  
Pedro J. GARCÍA-TERUEL ◽  
Pedro MARTÍNEZ-SOLANO
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Method Of Moments ◽  
Generalized Method Of Moments ◽  
Capital Requirement ◽  
Working Capital ◽  
Financial Flexibility ◽  
Method Of Moments Estimator ◽  
Financing Performance ◽  
Financing Strategy

This paper investigates the relation between the financing strategies of working capital requirement and firm performance for the period 1997 to 2012. Using the two-step generalized method of moments estimator, we find that a suitable financing strategy can help firms improve their performance. Moreover, the results indicate that the working capital requirement financing-performance relation changes during a financial crisis. Finally, we also find that this relation depends on a firm’s financial flexibility. The findings are of interest for managers and researchers and show that managers should not only be concerned about investing in working capital requirement but also consider how this investment is to be financed. To the best of our knowledge, this is the first paper to analyse how the financing strategy selected by firms to finance their working capital requirement affects their performance.

Working capital financing and corporate profitability of Indian manufacturing firms

2018 ◽  
Vol 56 (2) ◽  
pp. 441-457 ◽  
Author(s):  
Ajaya Kumar Panda ◽  
Swagatika Nanda
Keyword(s):  
Linear Relationship ◽  
Capital Requirement ◽  
Working Capital ◽  
Short Term ◽  
Financial Flexibility ◽  
Content Type ◽  
Indian Economy ◽  
Manufacturing Sectors ◽  
Non Linear ◽  
Capital Financing

Purpose 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. Design/methodology/approach 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. Findings 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. Originality/value 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 speed of adjustment in working capital requirement

2013 ◽  
Vol 19 (10) ◽  
pp. 978-992 ◽  
Author(s):  
Sonia Baños-Caballero ◽  
Pedro J. García-Teruel ◽  
Pedro Martínez-Solano
Keyword(s):  
Capital Requirement ◽  
Working Capital ◽  
Speed Of Adjustment

scholarly journals The Moderating Effect of Working Capital Management on the Relationship between Working Capital Determinants and Firm Performance

2018 ◽  
Vol 2 (1) ◽  
pp. 38-48
Author(s):  
Ahmad Rizal Mazlan ◽  
Choong Yuen Leng
Keyword(s):  
Firm Performance ◽  
Manufacturing Firms ◽  
Management Model ◽  
Capital Requirement ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Research Framework ◽  
The Relationship ◽  
Moderating Role

This research examines working capital management moderating role on the relationship between the key determinants of working capital and firm performance among 282 public-listed manufacturing firms in Malaysia for the period of 2010 to 2014. In this study, working capital management components are categorized into working capital requirement and net liquid balance. The evidence suggests that the relationship between critical determinants of working capital and firm performance is moderated by both working capital requirement and net liquid balance. Further, the results show that the research framework does form a contemporary working capital management model.

scholarly journals Pengaruh Kinerja Perusahaan terhadap Kebutuhan Modal Kerja Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia

2018 ◽  
Vol 3 (2) ◽  
pp. 117-128
Author(s):  
Eka Putra Pratama ◽  
Arif Darmawan
Keyword(s):  
Cash Flow ◽  
Firm Size ◽  
Sampling Technique ◽  
Regression Result ◽  
Capital Requirement ◽  
Sales Growth ◽  
Manufacturing Companies ◽  
Firm Age ◽  
Working Capital ◽  
Operating Cash Flow

This study aims to determine the effect of company performance proxied with ROA, Sales Growth, Firm Size, Firm Age, Assets Tangibility, Operating Cash Flow and Leverage to Working Capital Needs (WCR). The data used are secondary data of manufacturing companies listed in Indonesia Stock Exchange (IDX) period 2012-2015. Sampling method using purposive sampling technique. The analysis used is descriptive statistic, panel data regression. Result of research found ROA have a significant positive effect to working capital requirement. Firm Size, Assets Tangibility, and Leverage have a significant negative effect on working capital requirement. Sales Growth, Firm Age, and Operating Cash Flow have no effect on working capital requirement. This research can be used as a consideration of the company to further improve the performance of the company and pay attention to the factors of determination of working capital needs, so that the working capital needs of the company can be fulfilled and optimal.  

scholarly journals Do Firms Approach the Target Working Capital Requirement? A Case of Pakistan

2018 ◽  
Vol 10 (1) ◽  
Author(s):  
Ruqia Shaikh ◽  
Pervaiz Memon ◽  
Muhammad Shaique ◽  
Ehsan Ul Hassan
Keyword(s):  
Capital Requirement ◽  
Working Capital
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