Working Capital Management and Extent of Influence on Public Listed Firms’ Performance in Industrial Product Industry.

Abstract

Due to the turbulent global environment, effective working capital management has been accentuated ever since the manifestation of the global financial crisis wherein the eventuality of the unforeseen plight is immensely affecting both firms’ profitability and liquidity risk. The purpose of this study is to examine the influence of working capital management on firm performance, likewise furnishing insight into the pertinence of the theories that are applicable to exemplify the management of short-term resources in a firm. This study adopts dynamic panel data methodology, a one-step system generalised method of moments (GMM) to capture the endogeneity issues arising from the unobserved time-invariant firm-specific elements as well enhance the data efficiency. Adopting a sample of 156 Malaysian public companies listed on bursa Malaysia in the industrial products economy sector with the time period of 10 years (i.e. from 2007 through 2016), the researcher discovers evidence as follows: the coefficient results implying a significant negative linkage between working capital proxy (i.e. ccc) and firm performance indicators. The firm size has been signified as a remarkable control variable that might affect firm profitability as well as firm market valuation due to the competitive edges that could gain through economies of scale. The novelty verdict endeavours to accommodate intuitions for finance managers as well prospective investors in envisaging the momentous working capital management in trading-off liquidity and returns, particularly in the region of emerging countries such as Malaysia.