Is working capital management value-enhancing? Evidence from firm performance and investments
By Nihat Aktas, Ettore Croci, D. Petmezas. 2015
495 citations recorded by the source corpus.
We examine the value effect of working capital management (WCM) for a large sample of US firms between 1982–2011. Our results indicate (i) the existence of an optimal level of working capital policy; and (ii) firms that converge to that optimal level (either by increasing or decreasing their investment in working capital) improve their stock and operating performance. We also document that corporate investment is the channel through which efficient WCM translates into superior firm performance. In particular, efficient WCM allows firms to redeploy underutilized corporate resources to higher-valued use, such as the funding of cash acquisitions.
Subfields: Accounting, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/538200cef0d7b2087f36a14434f83ac14cee7e26
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Accounting
- O. Shapir
- Yomna Abdulla
- Sorin Gabriel Anton
- Anca Elena Afloarei Nucu
- Rodrigo Zeidan
- V. Dang
- Arif Khurshed
In Strategy and Management
Citations in the corpus
- The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms (2020, methodology): “Aktas et al. (2015) document the relationship between WCM and firm performance on a sample of firms from the US over the period of 1982–2011 using fixed-effects regressions.”
- Cash Conversion Cycle and Value-Enhancing Operations: Theory and Evidence for a Free Lunch (2017, background): “The relationship between operating working capital (OWC), CCC, and profitability is not linear (Aktas et al., 2015). On the one hand, higher OWC through longer sales terms, higher inventories, or shortterm payables may increase sales. On the other hand, any investment in working capital generates a ”
- Stock Market Listing and the Use of Trade Credit: Evidence from Public and Private Firms (2017, background): “1 Trade credit is also a major component of working capital as nearly 40% of inventories and accounts receivable in US firms are financed with trade credit (Aktas et al., 2015).”