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- Title
Impact of Working Capital Management Policy on Market Value Addition.
- Authors
Bandara, R. M. S.
- Abstract
Working Capital Management (WCM) includes maintaining appropriate levels of current assets and current liabilities required by a firm. Management of short-term assets and liabilities needs a careful investigation since it plays an important role in deciding the firm's profitability, risk as well as its value. This research study investigated the impact of Working Capital Management Policy (WCMP) on firm value in Sri Lankan Companies. Data were gathered from 74 companies listed in the Colombo Stock Exchange (CSE) covering seven business sectors for the sample period of 2009/10 to 2013/14 which comprises 370 firm year observations. Descriptive statistics, correlation and panel regression analysis were employed as measures of analysis. Firms' Working Capital Investment Policy (WCIP) and Working Capital Financing Policy (WCFP) were used as independent variables. Firm value was measured in terms of Market Value Addition (MVA) as dependent variable in the study. According to the overall panel regression model, WCIP and WCFP both recorded a negative relationship to MVA proving the individual model results. The results showed significant negative relationship between the firms' degree of aggressiveness of WCIP and MVA of the companies in Sri Lanka. It provided evidence that the minimum level of investment in current assets leads to have higher MVA of the firms in Sri Lanka. Further results do not provide statistically significant results to prove the negative relationship between WCFP and MVA.
- Subjects
WORKING capital; MANAGEMENT of capital; MARKET value added; VALUE added (Marketing); STOCK exchanges
- Publication
Global Journal of Contemporary Research in Accounting, Auditing & Business Ethics, 2015, Vol 1, Issue 2, p354
- ISSN
2311-3162
- Publication type
Article