Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange
Working capital plays a vital role in shareholders’ wealth creation, yet there is a dearth of empirical studies on the relationship between working capital management and firm value in the South African economic environment. This study attempts to fill this gap by using Richards and Laughlin’s (1980...
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doaj-c5c63e5f216e4d6999d88450a36f63592020-11-25T02:31:42ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations 1810-49671812-93582017-03-01141808810.21511/imfi.14(1).2017.088226Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock ExchangeEmmanuel Kojo Oseifuah0Agyapong Gyekye1Associate Professor, Department of Accountancy, University of VendaEmeritus Professor, Department of Economics, University of VendaWorking capital plays a vital role in shareholders’ wealth creation, yet there is a dearth of empirical studies on the relationship between working capital management and firm value in the South African economic environment. This study attempts to fill this gap by using Richards and Laughlin’s (1980) Cash Conversion Cycle theory to investigate the impact of working capital management efficiency and its separate components on firm value of South African firms listed on the Johannesburg Stock Exchange (JSE). Panel data regression methodology was used to analyze accounting data obtained from I-Net Bridge/BFA McGregor for 75 firms for the 10 year period, 2003 to 2012, to determine the nexus between WCM and profitability (proxied by return on assets). The key findings of the study are as follows: 1) there exists a significant positive relationship between firm value and both inventory conversion period and receivables conversion period; 2) the relationship between the cash conversion cycle and firm value is positive but insignificant; 3) there is a significant positive relationship between accounts payable deferral period (PDP) and profitability; 4) firm size and firm value are significantly positively related, and 5) there is a significant negative relationship between leverage and firm value.https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/8226/imfi_2017_01_Oseifuah.pdffirm valueJohannesburg Stock Exchangemarket capitalizationshareholder wealth creationworking capital management |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Emmanuel Kojo Oseifuah Agyapong Gyekye |
spellingShingle |
Emmanuel Kojo Oseifuah Agyapong Gyekye Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange Investment Management & Financial Innovations firm value Johannesburg Stock Exchange market capitalization shareholder wealth creation working capital management |
author_facet |
Emmanuel Kojo Oseifuah Agyapong Gyekye |
author_sort |
Emmanuel Kojo Oseifuah |
title |
Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange |
title_short |
Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange |
title_full |
Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange |
title_fullStr |
Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange |
title_full_unstemmed |
Working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the Johannesburg Stock Exchange |
title_sort |
working capital management and shareholders' wealth creation: evidence from non-financial firms listed on the johannesburg stock exchange |
publisher |
LLC "CPC "Business Perspectives" |
series |
Investment Management & Financial Innovations |
issn |
1810-4967 1812-9358 |
publishDate |
2017-03-01 |
description |
Working capital plays a vital role in shareholders’ wealth creation, yet there is a dearth of empirical studies on the relationship between working capital management and firm value in the South African economic environment. This study attempts to fill this gap by using Richards and Laughlin’s (1980) Cash Conversion Cycle theory to investigate the impact of working capital management efficiency and its separate components on firm value of South African firms listed on the Johannesburg Stock Exchange (JSE). Panel data regression methodology was used to analyze accounting data obtained from I-Net Bridge/BFA McGregor for 75 firms for the 10 year period, 2003 to 2012, to determine the nexus between WCM and profitability (proxied by return on assets). The key findings of the study are as follows: 1) there exists a significant positive relationship between firm value and both inventory conversion period and receivables conversion period; 2) the relationship between the cash conversion cycle and firm value is positive but insignificant; 3) there is a significant positive relationship between accounts payable deferral period (PDP) and profitability; 4) firm size and firm value are significantly positively related, and 5) there is a significant negative relationship between leverage and firm value. |
topic |
firm value Johannesburg Stock Exchange market capitalization shareholder wealth creation working capital management |
url |
https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/8226/imfi_2017_01_Oseifuah.pdf |
work_keys_str_mv |
AT emmanuelkojooseifuah workingcapitalmanagementandshareholderswealthcreationevidencefromnonfinancialfirmslistedonthejohannesburgstockexchange AT agyaponggyekye workingcapitalmanagementandshareholderswealthcreationevidencefromnonfinancialfirmslistedonthejohannesburgstockexchange |
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