Corporate financial strategies and performance: Insights from China’s Shanghai Stock Exchange

This study investigated the moderating role of interest rate (IR) and inflation (INF) in the association between financial management practices (FMPs) and financial performance of non-financial companies listed on China’s Shanghai and Shenzhen stock exchanges. Espousing a mixed-methods approach, with quasi-experimental design, grounded in pragmatism, it analysed financial data from 3,689 companies (2010–2019) and interviews, utilising two-step system generalised method of moments, effectively addressing endogeneity and other econometric issues, yielding 36,890 balanced-panel, firm-year observations. Fixed effects and random effects were employed to handle unobserved heterogeneity and guarantee robustness. Findings indicated that, whilst total-debt-to-total-assets ratio and dividend yield significantly and negatively influenced firm financial performance (FFP), total-equity-to-assets-ratio, cash conversion cycle, current ratio, total assets turnover, tangibility, dividend payout ratio, firm size and firm age significantly and positively impacted FFP. These associations were complementarily moderated/strengthened by IR and INF, emphasising the risks of high-borrowing costs for highly-geared companies and stressing the necessity for corporate deleveraging and optimal capital structures. Managers are admonished to engage in diversified projects with positive net present value to guarantee constant cash flows and sustainable dividend payments. Whilst the study’s framework is Chinese-oriented, it is replicable in similar developing economies. It incorporates prior unexploited FMP metrics into the resource-based view theory, extending the theory’s scope, making it more rigorous, robust and generalisable.

This study examined the moderating influence of interest rate-(IR) and inflation-(INF) in the relationship between financial management practices-(FMPs) and the performance of listed-companies in Ghana. Espousing a mixed-methods-approach, with quasi-experimental design, it analyzed data from 36 firms-(2010–2023) and interviews, applying two-step System-GMM, to address endogeneity, and other econometric issues. Fixed effects-(FE) and Random Effects-(RE) were utilized to handle unobserved heterogeneity and guarantee robustness. The results revealed that total-debt-to-assets-ratio-(TDTAR) and dividend yield-(DY) significantly and negatively impacted firm performance-(FP). Conversely, total-equity-to-assets-ratio-(TETAR), cash conversion cycle-(CCC), current ratio-(CR), total assets turnover-(TAT), tangibility-(TANG), dividend payout ratio-(DPR), firm size-(SZ), and firm age-(AGE) significantly and positively influenced firm performance-(FP). IR and INF moderated these relationships, highlighting the risks of high borrowing costs for leveraged firms and emphasizing the need for corporate deleveraging and optimal capital structures. Managers are advised to engage in diversified projects with positive net present value-(NPV) to ensure consistent cash-flows and sustainable dividend payments. While the study’s framework is tailored to Ghana, it is applicable to other emerging economies. It integrates previously unchartered FMP metrics into the resource-based-view-theory-(RBVT), extending the theory’s scope, making it more rigorous, robust and generalizable. This theory extension-driven approach offers novel theoretical/conceptual/methodological insights, along with detailed, context-specific, practical/managerial and policy implications.

This study investigated the impact of business financial strategies (BFSs) on the performance of listed small and medium enterprises (SMEs) on China’s Shenzhen Stock Exchange from 2010 to 2023. Utilising a mixed-methods approach, with a quasi-experimental design grounded in pragmatism, the research analysed data from 1,575 SMEs, supplemented by interviews. A two-step system generalised method of moments estimation technique was used to address endogeneity, heteroscedasticity, reverse causality, simultaneity, Nickell bias, autocorrelation, measurement error and other econometric challenges, supported by fixed effect and random effect models to address unobserved heterogeneity and omitted variable biases and ensure the robustness of the study findings. The results indicated that total-debt-to-total-assets ratio and dividend yield significantly and indirectly affected SMEs’ performance. Contrarily, factors such as total-equity-to-total-assets ratio, cash conversion cycle, current ratio, total assets turnover, tangibility, dividend payout ratio and firm age had direct impacts on SMEs’ performance. The study highlighted the importance of SMEs deleveraging, optimising capital structure and prudently managing assets/working capital. It also recommended that SMEs adopt diverse investment appraisal (capital budgeting) techniques to generate adequate cash flows and ensure sustained dividend payments. Although focused on China, the study’s framework applies to other emerging markets, integrating BFS metrics into the resource-based view theory, extending the RBVT, making it more generalisable and robust, strengthening the research theoretically, conceptually and methodologically.

The purpose of this research is to conclude the impact of ownership structure and board characteristics on dividend payout ratio and dividend yield. The sample in this study are companies from the manufacturing sector listed on Indonesia Stock Exchange in 2017-2021. The sampling technique used in this study is purposive sampling and the analysis method is tobit model. The independent variables in this study are institutional ownership, concentrated ownership, board size, female board member, and independent board member, and the control variable are firm age, financial leverage, firm size, and return on assets, with the dividend payout ratio and dividend yield as the dependent variable. The results show that independent board member and firm size have a positive effect on dividend payout ratio and dividend yield, while institutional ownership, concentrated ownership, board size,and financial leverage, have no effect on dividend payout ratio and dividend yield. On the other hand, female board member have a positive effect on dividend yield but no effect on dividend payout ratio, and return on assets show a positive effect on dividend payout ratio but no effect on dividend yield. This study is expected to give implication for company managers and investor. By paying attention to the indicators that lead the company to make a good dividend policy, and also to be a source of information for investors to see the dividend payout ratio and dividend yield given by the company to shareholders.

This systematic review examines the relationship between working capital management (WCM) and profitability, with a focus on the impact of cash conversion cycle (CCC) on profitability. Out of the 53 independent studies analyzed, only those that used CCC as a measure for WCM were selected for analysis. The review found that efficient WCM, specifically the optimal level of CCC, has a significant impact on profitability. Firms should review their receivables and payable policy to maintain market value, shareholders' wealth, and minimize the risk of bankruptcy. Accelerating cash collections through proper management, effective policies, and corporate strategies also improves profitability. The study highlights CCC as a powerful tool for firms to manage their working capital efficiently. The review suggests that firms should maintain an optimal CCC level and effective management practices to improve WCM and profitability. Further research using qualitative research methods is needed to gain a deeper understanding of WCM practices.

The survival of a company is highly dependent on the management of its working capital. Effective working capital management can lead to greater profitability. Insufficient working capital or liquidity shortages can severely hinder profitability and operational sustainability. The primary objective of this research was to examine the relationship between efficient working capital management and profitability. To explore this connection, inventory, the cash conversion cycle, accounts receivable, and accounts payable were used as key indicators of working capital management. Profitability was evaluated using return on equity and return on assets, supported by a conceptual framework based on secondary data. The findings revealed a strong correlation between efficient working capital management and enhanced profitability. Effective management of cash inflows and outflows reduced financing costs and enhanced liquidity, leading to higher returns on equity and assets for companies with shorter cash conversion cycles. Companies with efficient accounts receivable processes significantly reduced their day’s sales outstanding, improving cash flow and operational flexibility. Maintaining optimal inventory levels enabled companies to increase turnover rates, improve profit margins, and lower inventory holding costs. Moreover, efficient accounts payable management, particularly through negotiated credit terms with suppliers, optimised payment schedules without damaging supplier relationships, further enhancing profitability. The results highlighted that businesses can achieve long-term profitability by aligning their working capital components with operational goals. Companies that actively manage their cash conversion cycle are better equipped to meet financial obligations without excessive debt, enabling them to invest in expansion opportunities. From a practical perspective, this study underscored the strategic importance of working capital management in driving profitability. Businesses can improve financial stability and strengthen their competitive position by adopting data-driven approaches to optimise cash flow, inventory, and credit management. These insights offer valuable guidance for managers aiming to enhance their company’s operational resilience and financial performance

This study examines the impact of stock market liquidity on dividend policy of Nepalese commercial banks. Dividend payout ratio and dividend yield are selected as the dependent variables. The selected independent variables are capitalization, non-performing loan, profitability, liquidity, firm size and lagged market price. The study is based on secondary data of 16 commercial banks with 112 observations for the study period from 2015/16 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, publications and websites of Nepal Rastra Bank (NRB) and annual reports of the selected commercial banks. The correlation coefficients and regression models are estimated to test the significance and importance of stock market liquidity on dividend policy of Nepalese commercial banks. The study showed that liquidity has a positive impact on dividend payout ratio and dividend yield. It means that increase in liquidity leads to increase in dividend payout ratio and dividend yield. Furthermore, profitability has a positive impact on dividend payout ratio and dividend yield. It indicates that increase in profitability leads to increase in dividend payout ratio and dividend yield. Likewise, firm size has positive impact on dividend payout ratio and dividend yield. It means that larger the firm size, higher would be the dividend payout ratio and dividend yield. Similarly, lagged market price has a positive impact on dividend payout ratio. It indicates that increase in lagged market price leads to increase in dividend payout ratio. Further, market capitalization has a positive impact on dividend payout ratio. It means higher the market capitalization, higher would be the dividend payout ratio. Likewise, non performing loan has a negative impact on dividend payout ratio. It indicates that increase in non-performing loan leads to decrease in dividend payout ratio.

Working capital management is critical because it affects a company’s profitability, liquidity, and investment decisions, all of which have an impact on financial performance. As a result, effective and efficient working capital management is an essential component for commercial and service businesses. Given the importance of the commercial and services industries to the Kenyan economy, the goal of this research was to investigate the impact of working capital management on the financial performance of these firms, particularly those listed on the Nairobi Securities Exchange (NSE), from 2003 to 2022. Working capital management was measured using the average age of inventory, average collection period, average payment period, and cash conversion cycle, whereas financial performance was measured using return on asset, return on equity, and net operating profit margin. Using panel regression analysis, the results showed that the average inventory age, average collection period, average payment period, and cash conversion cycle were all negatively related to financial performance for NSE-listed commercial and service firms. Based on the findings, it is recommended that Kenyan commercial and service firms adopt prudent optimal working capital management practices to improve firm financial performance and maximize shareholder wealth.

Management of working capital is one of the key functions in financial management. Working capital management has its impact on the liquidity and profitability of the firm. Because of its importance, this study examines the impact of working capital management on firms’ profitability and firms’ value in listed companies of Sri Lanka. Financial data from forty-one companies listed in the Colombo Stock Exchange for the period of four years, which comprises 205 firm-year observations were analysed using panel data regression analysis. It is revealed that the cash conversion cycle, days of accounts payable, and working capital financing policy has a significant negative impact on return on assets. Meanwhile, a significant positive effect is found between days of accounts receivable and return on assets. Further, there is a significant positive impact of firm size on both firms’ profitability and firms’ value. Evidence implies that firms could improve their profitability through efficient working capital management. The evidence implies that firms may improve their profitability through efficient working capital management and that would be useful to consider on maintaining optimal working capital management components and policies to ignore corporate collapse in Sri Lanka.

This research paper purposes to discover the reasons that impact the working capital management (WCM) of Indian-listed manufacturing firms. The study uses a panel data set of 291 firms covering years from 2011 to 2020. The authors use working capital requirement (WCR) and cash conversion cycle (CCC) as proxies for working capital management and assess the effect of operating cash flow (OCF), performance as return on assets (ROA), valuation as Tobin's Q (TQs), size, age, growth opportunities, leverage, and economic condition as the gross domestic product (GDP) over them. We use OLS and GMM estimators for the analysis of the study. Indian listed manufacturing firms' cash conversion cycle (CCC) has been found to be positively correlated to their firm value, performance, and leverage. At the macro level, CCC is positively correlated to GDP. Further, CCC has been found to be negatively correlated with growth opportunities, operating cash flow, firm size, and age. The working capital requirement (WCR) of the firms, on the other hand, is positively associated with performance, firm age, and value, while it is negatively related to OCF, growth opportunities, leverage, size, and GDP. Our study adds uniqueness to the existing works on working capital in many ways. First, to our knowledge, very few studies exist to measure working capital management in the Indian context using two proxies WCR and CCC of working capital as dependent variables. Second, we used both OLS and GMM estimators to measure the explanatory variable's effect over WCR and CCC which provided a more valid result. Third, we used eight factors as explanatory variables that provide a wider scope to explain the working capital management of Indian listed firms.

The primary objective of this study is to examine the impact of working capital management efficiency on the financial health/well-being of a company measured in terms of firm value in the context of a rapidly emerging economy. This study applies a multivariate ordinary least square regression analysis on industry adjusted performance variable of 1532 Indian firms listed on the National Stock Exchange (NSE) for a period of 18 years (from 1999-2017). Not all of the 1532 firms selected for this study were listed during the whole period of study. Only 610 firms were listed at the beginning and gradually more and more companies started to get listed until eventually 922 more companies got listed to the initial tally of 610 listed firms making the total number of listed companies to be 1532 by the end of the study period. A total of 19862 firm year observations correspond to listed firms and 9246 firm year observations for unlisted firms making it a total of 29108 firm year observations. The findings of this study indicate that an efficient working capital management (proxied by Cash conversion cycle and components thereof) leads to better firm performance when adjusted for industry differences. It also shows that the relationship follows a curvilinear trajectory instead of a linear one as a change in sign in the coefficient of working capital management proxy (Cash Conversion Cycle) occurs and its square term and both are manifesting itself as significant in the listed companies. This is a co-relational study investigating the association between working capital management efficiency and firm performance. The findings of this study is based in an economy that is unique in its own right. Indian corporate landscape is replete with business groups and they dominate the market in terms of asset holding and market capitalization coupled with the existence of institutional gaps and weak legal enforcement mechanisms. All of which makes the Indian corporate landscape totally different from its more developed counterparts thus rendering the results not generalizable. The relationship between these variables should be verified in other economies taking their unique characteristics into account. This study to the best of the author’s knowledge is the first one to investigate the relationship between working capital management and firm performance on such a comprehensive dataset having 62 different industries in an emerging economy. The findings of the study are intended to be of use to financial managers, investors, financial management consultants, and other stakeholders.

This proposed study aims to examine how debt financing affects the working capital management (WCM) efficiency of firms in eight selected MENA countries over the period 2016-2020. This study discusses different theories of debt financing which include the trade-off theory, the pecking order theory, the market timing theory, and the agency theory (i.e., the agency theory of debt, equity, and free cash flow). Particularly, the study addresses how short-term debt, long-term debt, and total debt influence WCM efficiency. We hypothesize that there are positive relationships between the short-term debt (measured by the current ratio), the long-term debt (measured by the long-term debt to total assets ratio), and the total debt (measured by the total debt to total assets ratio) toward WCM (measured by cash conversion cycle). Firm’s specific characteristics such as the firm type, the firm size, firm’s sales growth, and tangibility were used as control variables for WCM. To achieve the study objectives, a sample of 718 non-financial listed companies on stock exchanges in countries of Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and UAE will be used over the period 2016-2020. Secondary quantitative data will be collected from the annual financial statements of firms. The multiple regression model will be used to test the study hypotheses. This proposed paper originally contributes to the extant literature in several ways. First, there were limited studies of WCM in the MENA context and the current study provided a new insight that has not been investigated before in the MENA region. Thus, it bridges the gap in the literature. However, the majority of extant WCM literature emphasized the relationship between efficient WCM and firms profitability. Moreover, this paper contributes to developing efficient WCM practices and strategies that improve the financial performance of listed companies in the MENA region

Purpose - This study aims to investigate the effect of business cycle on the relation between working capital management and corporate performance.Methodology - We examine the relation between working capital and profitability under economic down and upturns, on energy firms which are traded on Istanbul Stock Exchange and included in BISTELKT index. Working capital is measured by cash conversion cycle. EBIT to total assets ratio is used to represent profitability and business cycle is modeled by gross domestic products. Data is on quarterly basis from 2012 to 2018.Findings - The analysis shows that there is a negative relation between cash conversion cycle and profitability during economic growth, while a reverse relation exists in economic recession periods.Conclusion- The study shows that the efficient working capital management is important in terms of the firms' profitability, and must be included in financial planning especially in the times of economic upturns.

Many of previous studies suggested that working capital management is an important component of firm`s financial decision and efficient working capital management affects firms` profitability and it`s value. Recently, Korean shipping firms have been suffering from financial distress by recession of shipping economy. In this point of view, this study tries to investigate the relationship between working capital management and shipping firm`s profitability, using panel data on 46 Korean shipping firms for the period of 2004-2013. As result of panel regression, it proved that average payment period, inventory turnover, cash conversion cycle and operating cycle are significantly associated with firms profitabilities such as profit margin ratio and operating profit ratio, and the manager of shipping firm can increase firms profitability by more efficient working capital management. There are strong positive relationships between average payment period and operating cycle and firm`s profitability. These results suggest that managers can create firm`s value by increasing average payment period and operating cycle. Otherwise inventory turnover and cash conversion cycle have negative relationships with firm`s profitability. It means that managers can increase firm`s profitability by reducing these variables.

Financial crisis that hit the economic standing in 2008 has put the blame on the mismanagement of the working capital of firms. Empirical evidences highlight the importance of efficient and sound working capital management thus managers should therefore be alert and sensitive on the factors affecting working capital management to improve firm’s performance in order to stay resilient. Nevertheless, limited studies have been done on this matter and is very much pronounced in the East Asian countries, despites the fact that these countries are the worst affected by the crisis. Malaysia is no exception in suffering from the turmoil thus it is paramount to examine the influencing factors of working capital management especially before, during and after a financial crisis in Malaysia. A panel regression is employed on a financial data of 57 Malaysian listed firms from 2002-2012. The study period is divided into three different scenarios, 2002-2006 (before the crisis), 2007-2008 (during the crisis) and 2009-2012 (after crisis). The cash conversion cycle is employed as a measurement of working capital management. The independent variables and their measurements are chosen based on previous studies, which are, profitability (net profit/total asset), debt (total debt/total asset), sales growth (salest–salest-1)/salest-1), free Cash flow (free cash flow/total asset), firm size (natural logarithm of sales) and liquidity (current asset/current liabilities). Several tests are carried out and the statistical procedure showed that the Random Effect model is the best model to explain the relationship between working capital management and its explanatory variables. A constant negative relationship is spotted between profitability and firm size with working capital management for all the three periods. The negative relationship between profitability and firm size with working capital management provide strong evidence on pecking order theory. Sales growth is negatively related to working capital management before and after the crisis periods. Debt appears to be mixed, with positive sign before the crisis but negative after the crisis. Free cash flow is positively related during the crisis period. No significant relationship however is detected on liquidity. The same variables (profitability, debt, sales growth and firm size) have significant relationships with working capital management before and after the crisis. This study has policy implication where managers can be sensitive on factors affecting working capital management and give particular attention on profitability, debt, sales growth and firm size in the management of their working capital regardless of the economic scenarios.