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Key components of working capital management: investment performance in Malaysia

This study attempts to examine the role of working capital management components on four commons which are distinctive dimensions of business investment performance in Malaysia. The analysis covers 431 listed companies for the period 2000-2017 post the Asian financial crisis. The four performance in...

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Main Authors: Loo, Pui Yan, Lau, Wei Theng
Format: Article
Language:English
Published: Growing Science 2019
Online Access:http://psasir.upm.edu.my/id/eprint/81167/1/CAPITAL.pdf
http://psasir.upm.edu.my/id/eprint/81167/
http://growingscience.com/beta/msl/3314-key-components-of-working-capital-management-investment-performance-in-malaysia.html
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spelling my.upm.eprints.811672021-06-19T16:40:51Z http://psasir.upm.edu.my/id/eprint/81167/ Key components of working capital management: investment performance in Malaysia Loo, Pui Yan Lau, Wei Theng This study attempts to examine the role of working capital management components on four commons which are distinctive dimensions of business investment performance in Malaysia. The analysis covers 431 listed companies for the period 2000-2017 post the Asian financial crisis. The four performance indicators are return on assets (to proxy book return on overall business assets), return on equity (to proxy book return on shareholders’ fund), Tobin’s Q (to proxy firm valuation) and stock performance (to proxy real shareholder wealth). Our results indicate that working capital components of receivables collection period, inventory conversion period, payables deferral period, overall cash conversion cycle, current ratio, quick ratio, and cash ratio have generally exhibited important relationships with investment performance before and after the 2007-2008 subprime crisis. We would like to highlight the very robust negative effect of receivables collection period and cash conversion cycle. In addition, it is worth noting the distinctive roles of cash conversion cycle components and working capital liquidity ratios. While overly high liquidity position is usually viewed as inefficiency and detrimental for profitability, our panel data analysis consistently show that a high liquid position is favourable if the impact of cash conversion cycle is well considered. Hence, it is crucial for managers to prioritize the importance of working capital requirements to enhance the value of investors. Growing Science 2019 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/81167/1/CAPITAL.pdf Loo, Pui Yan and Lau, Wei Theng (2019) Key components of working capital management: investment performance in Malaysia. Management Science Letters, 9 (12). pp. 1995-1964. ISSN 1923-9335; ESSN: 1923-9343 http://growingscience.com/beta/msl/3314-key-components-of-working-capital-management-investment-performance-in-malaysia.html 10.5267/j.msl.2019.7.010
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description This study attempts to examine the role of working capital management components on four commons which are distinctive dimensions of business investment performance in Malaysia. The analysis covers 431 listed companies for the period 2000-2017 post the Asian financial crisis. The four performance indicators are return on assets (to proxy book return on overall business assets), return on equity (to proxy book return on shareholders’ fund), Tobin’s Q (to proxy firm valuation) and stock performance (to proxy real shareholder wealth). Our results indicate that working capital components of receivables collection period, inventory conversion period, payables deferral period, overall cash conversion cycle, current ratio, quick ratio, and cash ratio have generally exhibited important relationships with investment performance before and after the 2007-2008 subprime crisis. We would like to highlight the very robust negative effect of receivables collection period and cash conversion cycle. In addition, it is worth noting the distinctive roles of cash conversion cycle components and working capital liquidity ratios. While overly high liquidity position is usually viewed as inefficiency and detrimental for profitability, our panel data analysis consistently show that a high liquid position is favourable if the impact of cash conversion cycle is well considered. Hence, it is crucial for managers to prioritize the importance of working capital requirements to enhance the value of investors.
format Article
author Loo, Pui Yan
Lau, Wei Theng
spellingShingle Loo, Pui Yan
Lau, Wei Theng
Key components of working capital management: investment performance in Malaysia
author_facet Loo, Pui Yan
Lau, Wei Theng
author_sort Loo, Pui Yan
title Key components of working capital management: investment performance in Malaysia
title_short Key components of working capital management: investment performance in Malaysia
title_full Key components of working capital management: investment performance in Malaysia
title_fullStr Key components of working capital management: investment performance in Malaysia
title_full_unstemmed Key components of working capital management: investment performance in Malaysia
title_sort key components of working capital management: investment performance in malaysia
publisher Growing Science
publishDate 2019
url http://psasir.upm.edu.my/id/eprint/81167/1/CAPITAL.pdf
http://psasir.upm.edu.my/id/eprint/81167/
http://growingscience.com/beta/msl/3314-key-components-of-working-capital-management-investment-performance-in-malaysia.html
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score 13.211869

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