Working Capital Management and Firm PerformanceEvidence from Vietnam Stock Exchange

• Main Authors: Phung Kim Phong, 馮金風
• Other Authors: Wang Yung Chih
• Format: Others
• Language: en_US
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/n822z9

碩士 === 國立高雄應用科技大學 === 資通產品研發與生產碩士外國學生專班 === 101 === Working capital management plays an important role in firm performance, which in turn decides long-run growth of a business. The management of working capital is involved with managing current assets and current liabilities in order to maintain an optimal level of working capital. Earlier studies have found the significant impact of working capital management on firm performance and recommended solutions for enterprises. This study aims to investigate how working capital would impact on firm performance, i.e., the relationship between the components of working capital management and firm performance with the Vietnamese listed companies as a sample. The measured variables of working capital are working capital cycle, inventory turnover, account receivables turnover, operating cycle, quick ratio, and net working capital ratio. The firm performance was indicated in terms of firm value by natural logarithm of stock price, Tobin’s q, and firm profitability by return on total assets, return on equity, net profit margin. The method of panel data analysis is applied to empirically examine the data of 197 firms for a period of 2007-2011. The results reveal the significant negative association between operating cycle and firm performance; it is also shown that high investment in inventories and receivables may result in lower performance, and more investment in net working capital may lead to better performance. The findings indicate that working capital management has a strong impact on firm performance. Our study suggests firm managers to increase liquidity to a proper level, change capital structure to lower leverage level, and keep inventory turnover period shorter in order to improve firm performance