Author : Maeenuddin, adeel akhtar, muhammad wajid raza
Keyword : Economic value added momentum, working capital management, firm performance.
Subject : Finance and accounting
Article Type : Original article (research)
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Abstract : Trade credit and inventory management policies are key components of working capital management (WCM) and play important role in explaining the cross sectional variation in firm performance. We used cash conversion cycle, a comprehensive measure for WCM. However unlike previous studies we assess firm performance with economic value added momentum rather than accounting based profits. We evaluate cash conversion cycle with the help of three accounting ratios, creditor’s turnover, debtor’s turnover and inventory turnover. Our empirical evidence is based on non-financial firms listed with Pakistan Stock Exchange for the period (2007-2016). The secondary data is obtained from the official website of State Bank of Pakistan and verified with the consolidated financial statements of the firms. Our results based on descriptive statistics show that firms with relatively lower (higher) days inventory turnover and days debtor turnover (days creditors turnover) results in lower cash conversion cycle and leads to higher EVA momentum. Results based on fixed effect model showed that components of WCM plays significant role in explaining the variation in EVA momentum and can be used to predict changes in EVA momentum.
Article by : Maeenuddin
Article add date : 2020-08-04
How to cite : Maeenuddin, adeel akhtar, muhammad wajid raza. (2020-August-04). Impact of working capital management on firm’s economic value added momentum. retrieved from https://www.openacessjournal.com/abstract/63