Working Capital Management: The Effect of Market Valuation and Profitability in Malaysia

By N. Mohamad, N. M. Saad. 2010

330 citations recorded by the source corpus.

The paper is made with an attempt to bridge the gap in the literature by offering empirical evidence about working capital management and its effect to the performance of Malaysian listed companies from the perspective of market valuation and profitability. The secondary data for analysis is retrieved from Bloomberg’s Database of 172 listed companies randomly selected from Bursa Malaysia main board for five year period from 2003 to 2007. The study aims to explore the effects of working capital component i.e cash conversion cycles (CCC), current ratio (CR), current asset to total asset ratio (CATAR), current liabilities to total asset ratio (CLTAR), and debt to asset ratio (DTAR) to the firm’s performance by looking at firm’s value i.e Tobin Q (TQ) and profitability i.e. return on asset (ROA) and return on invested capital (ROIC). Applying correlations and multiple regression analysis, the result shows that there are significant negative associations between working capital variables with firm’s performance. Thus it highlights the importance of managing working capital requirements to ensure an improvement in firm’s market value and profitability and this aspect must form part of the company's strategic and operational thinking in order to operate effectively and efficiently.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/bb823ad5e563a72c99f4806f167d6b42093ee1d2

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1. Ali Saleh Ahmed Alarussi
2. S. Alhaderi
3. Gamze Vural
4. Emin Huseyin Cetenak
5. Ahmet Gökhan Sökmen
6. I. Tahir

Citations in the corpus

• THE RELATIONSHIP BETWEEN ENTERPRISE RISK MANAGEMENT (ERM) AND FIRM VALUE: EVIDENCE FROM MALAYSIAN PUBLIC LISTED COMPANIES (2011, background): “Study by Mohamad and Saad (2010) on 172 selected listed companies in Bursa Malaysia found that Return on Asset (ROA) as a proxy of profitability was significant at 1 percent to firm value (as proxied by Tobin‟s Q).”
• AFFECTS OF WORKING CAPITAL MANAGEMENT ON FIRM’S PERFORMANCE: EVIDENCE FROM TURKEY (2012, background): “Literature Review In literature, traditional definition of working capital is current assets minus current liabilities (Preve and Sarria-Allende, 2010). Current assets include firm‟s inventories, accounts receivable, and minimum level of liquidity. Firms usually finance their current assets by short”
• Factors affecting profitability in Malaysia (2018, background): “Examples of these studies include Ramasamy et al. (2005), Narware (2010), San and Heng (2011), Razak et al. (2008) and Salim Yadav (2012).”
• Working capital level influence on SME profitability (2016, unknown): “The following control variables are included in all regressions because they have been found by previous literature to explain firm profitability (see, Samiloglu and Demirgunes, 2008; Mathuva, 2010; Mohamad and Saad, 2010).”