Static and Dynamic Working Capital Management: the Direct and Indirect Impacts on Profitability and Market Value

Abstract

This paper investigated the impact of working capital management on firms' performance, profitability and market value. This study divided working capital management into two dimensions which are static working capital management and dynamic working capital management. The main focus of this study was 381 listed companies in the Stock Exchange of Thailand (SET). Secondary data collected from 2013 to 2017 was analysed by using the path analysis method. The results manifested in three aspects, (1) the direct effects of the static working capital management on the market value, (2) the direct effects of the dynamic working capital management on the profitability and market value, and (3) the indirect effects of the static and dynamic working capital management on the market value through profitability. The results also suggested a profitability and market value increase when the listed companies have a high current ratio and short cash conversion cycle.