Catalogue Search | MBRL
Are you sure you want to remove the book from the shelf?
{{itemTitle}}
1,461,067
result(s) for
"working capital"
Sort by:
Supply Chain Contract Design Under Financial Constraints and Bankruptcy Costs
We study contract design and coordination of a supply chain with one supplier and one retailer, both of which are capital constrained and in need of short-term financing for their operations. Competitively priced bank loans are available, and the failure of loan repayment leads to bankruptcy, where default costs may include variable (proportional to the firm’s sales) and fixed costs. Without default costs, it is known that simple contracts (e.g., revenue-sharing, buyback, and quantity discount) can coordinate and allocate profits arbitrarily in the chain. With only variable default costs, buyback contracts remain coordinating and equivalent to revenue-sharing contracts but are Pareto dominated by revenue-sharing contracts when fixed default costs are present. Thus, for general bankruptcy costs, contracts without buyback terms are of most interest. Quantity discount contracts fail to coordinate the supply chain, since a necessary condition for coordination is to proportionally reallocate debt obligations within the channel. With only variable default costs and with high fixed default costs exhibiting substantial economies-of-scale, revenue-sharing contracts with working capital coordination continue to coordinate the chain. Unexpectedly, for fixed default costs with small economies-of-scale effects, the two-firm system under a revenue-sharing contract with working capital coordination might have higher expected profit than the one-firm system. Our results provide support for the use of revenue-sharing contracts with working capital coordination for decentralized management of supply chains when there are bankruptcy risks and default costs.
This paper was accepted by Serguei Netessine, operations management.
Journal Article
Capital requirements, disclosure, and supervision in the European insurance industry : new challenges towards Solvency II
\"Solvency II is the most important regulatory innovation in the field of insurance in the past 20 years. The length of this project, the number of operators involved through impact studies and assessments, the adopted procedure and the wide range of innovations have created an atmosphere of great expectation around Solvency II entering into force. The adoption of a risk-based approach appears to be the most important innovation of the new regulatory framework because it determines important issues related to capital requirements and their supervision as well as their disclosure to the market. Capital Requirements, Disclosure, and Supervision in the European Insurance Industry provides an interesting analysis of Solvency II's issues by combining both the theoretical approach and the empirical implications and effects on the European insurance industry. It discusses the new challenges facing insurance companies through the examination of its structure, the rules with which insurance companies operating in Europe have to be compliant, and their implementation. \"-- Provided by publisher.
Book
Does the Efficiency of a Firm’s Intellectual Capital and Working Capital Management Affect Its Performance?
This study explores the efficiency of intellectual capital (ICE) and working capital management (WCME) in the GCC industrial sector and its potential impact on firm performance. The data were gathered from Standard & Poor’s database from 2015 to 2019. This study uses data envelopment analysis (DEA), regression analysis, and robustness tests to accomplish its aims. The results indicate that most firms do not employ their intellectual and working capital investments well and need improvement actions to achieve the best practices. The regression model results reveal that ICE and WCME significantly and positively influence firms’ performance. The results of this study support the resource-based, trade-off, and pecking order theories. The study findings have important implications for many stakeholders; for example, they would be helpful for firm decision-makers in managing their investments in intellectual and working capital to achieve the best practices and improve a firm's performance. In addition, the findings would be helpful for financiers, because high-performance firms are likely to have more reasonable valuations that facilitate debt financing. Moreover, the findings have noteworthy implications for trading procedures as investors aspire to attractive economic returns for their investments in corporations that pasture ICE and WCME issues. Additionally, these findings have important implications for employee job satisfaction and retention by improving IC management.
Journal Article
Working capital management and firm performance: are their effects same in covid 19 compared to financial crisis 2008?
The recent covid 19 has increased the challenges for worldwide businesses to manage working capital. Compared to the studies on the financial crisis of 2008, management of working capital and firm performance relation during the covid 19 is less studied, particularly in developing countries. Therefore, this study examined the working capital management and firm performance relation in 577 firms from three Asian developing countries from 2004 to 2020. The working capital measurement includes working capital investment policy, working capital financing policy, cash conversion cycle (CCC), and net working capital (NWC). Firm performance is measured by return on assets (ROA) and Tobin's Q (TQ). To examine the working capital management and firm performance during the crisis 2008 and covid 19, Kruskal-Wallis test is used. Results revealed that working capital management and firm performance were more affected during covid 19 than crisis 2008 period. In addition, this study compared the working capital management and firm performance relation for covid 19 and crisis 2008 using the dynamic panel system generalized method of moments (GMM). Results showed the difference in the effect of working capital management on firm performance during the covid 19 period as compared to the crisis 2008 period. CATAR significantly and negatively influenced ROA but significantly and positively influenced TQ. In contrast, CLTAR and CCC significantly and positively influenced ROA but significantly and negatively influenced TQ. NWC significantly and positively influenced ROA only. To the best of our knowledge, this study is the first empirical research study to extend cross-country analysis in respect of non-financial firms to the developing countries' context. The results of this study provide important managerial implications for firms. The different results for different firm performance proxies imply that firm managers must adopt the working capital policies which are profitable for firms and shareholders. Thus, firms in developing countries would be able to optimize their working capital according to the economic conditions.
Journal Article
Do competitive strategies affect working capital management efficiency?
PurposeThis study examines the effects of CLS and DS on companies' WCME and analyses the differences in WCME at company and market levels.Design/methodology/approachThis study adopts the DEA approach, regression, differences, and additional analyses to achieve its objectives. This study employs 235 non-financial companies and 1,175 company-year observations from eight active industries in the United States from 2016 to 2020.FindingsThe findings indicate that CLS and DS strategies positively influence companies' WCME. Additionally, WCME differed across size categories and industries, with large companies and those operating in the communication services industry showing better WCME. By contrast, WCME did not differ between the periods before and during the COVID-19 pandemic.Practical implicationsThis study scrutinizes the impact of CLS and DS strategies on companies' WCME to bridge the gap in this field. It extends the investigation of competitive strategies as explanatory variables for a company's WCME and examines the differences in companies' WCME at the company and market levels, which may assist decision-makers in improving their strategies and efficiencies for continuous improvement.Originality/valueThis study enhances current knowledge by uncovering the influence of CLS and DS strategies on improving companies' WCME, an underexplored topic. It also explores companies' WCME trends and patterns regarding company size, industry type, and the pandemic period to draw interesting conclusions about the essence of WCME.
Journal Article
Economic value added and working capital efficiency linkages: an Indian context
Purpose
This paper aims to explore the relationship between the economic value added (EVA) and the working capital efficiency (WCE) of the listed firms in India.
Design/methodology/approach
This paper uses annual data of 401 listed companies for the period 2012–2019. Furthermore, the dynamic panel data regression model was used to investigate the relationship between the variables of interest.
Findings
The results reveal that the net trade cycle (NTC) is significantly and negatively associated with listed firms’ economic value in India, indicating that a shorter NTC generates higher EVA for Indian firms. The authors further explore the association between individual components of the NTC with EVA. The authors also found that an inverse, and significant relationship exists between EVA and the individual components of the NTC. The findings also reported a meaningful relationship between EVA and control variables except for leverage and age. For listed firms, the results suggest that sales growth and firm size are crucial factors driving firms’ EVA.
Practical implications
Higher WCE enhances shareholder value creation, forming positive stakeholders’ expectations toward the company.
Originality/value
Over the years, many studies have been conducted to determine the relationship between WCE and traditional measures of firms’ profitability. However, hardly any study finds out the impact of WCE on the value-based measures of firms’ performance. This study fills the gap in the existing literature by analyzing the impact of WCE on firms’ EVA.
Journal Article
The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle
The purpose of this study is to examine the impact of working capital management (WCM) and working capital strategy (WCS) on firm’s financial performance across different stages of the corporate life cycle (CLC). We use Pakistani non-financial listed firms nested in 12 diverse industries over a period of 2005–2014 as the research sample and employ the hierarchical linear mixed (HLM) estimator, which can process multilevel data where observations are not completely independent. The empirical findings reveal that, overall, WCM is negatively associated with firm performance. However, this association is not static across different stages of a firm’s life cycle. For example, a negative association is more pronounced at the introduction stage followed by growth and decline stages, whereas WCM does not significantly impact the performance of mature firms. Likewise, WCS also causes varying effects on the financial performance across the CLC. A conservative strategy at the introduction, growth, and decline stages negatively affects firm performance, suggesting that these firms should adopt an aggressive strategy. Nevertheless, management of sample firms did not account for the respective life cycle stage while formulating a WCM strategy, which can seriously compromise their financial sustainability. These findings suggest that firms require customized WCM policies and WCS to attain sustainable financial performance at each stage of firm life cycle. Thus, managers should not overlook the significant role of CLC stages in their financial planning to ensure the sustainable functioning of the enterprise.
Journal Article
Working capital management and profitability of listed manufacturing firms in Ghana
Purpose>This study examines the effect of working capital management on profitability of listed manufacturing firms in Ghana.Design/methodology/approach>The study employs a quantitative research approach within the causal research design using a balance panel of 20 manufacturing listed firms from 2015 to 2019.Findings>The study reveals that inventory management, account receivables, account payables, cash conversion cycle, current asset, current ratio and firm size have positive effects on return on assets (ROA) and return on return on equity(ROE) whilst leverage affects them negatively.Research limitations/implications>The study only covers 20 manufacturing firms generally due to data unavailability. However, the outcome has useful information for manufacturing firms.Practical implications>The study brings to light effective ways of improving the profitability of manufacturing firms through policies.Social implications>The findings are beneficial to manufacturing firms and countries for the purpose of improving performance of firms and welfare of the people through direct and indirect chain effects of increasing investments, remunerations and scales of production.Originality/value>This study adds insights into the existing literature on working capital management namely methodology, effects of components on profitability of manufacturing firms and socioeconomic implications- evidence from Ghana.
Journal Article
Working capital management and profitability: Cash threshold effects in Vietnam’s transportation sector
Type of the article: Research Article AbstractThis study examines whether the relationship between working capital management and profitability in Vietnam’s listed transportation is nonlinear and influenced by a cash-holding threshold. Using panel data from 88 transportation firms listed on HSX, HNX, and UPCOM during the period 2014–2023, and Hansen’s (1999) threshold regression, the study identifies the threshold point and estimates the model parameters. The empirical results reveal that before reaching the identification threshold, DSO, DPO, and DSI have a noticeably negative impact on ROA (coefficients being –0.004, –0.006, and –0.017, p < 0.01), indicating that lengthening collection, payment, or inventory periods harms profitability under lower liquidity conditions. However, once the identified threshold is exceeded, the effects of DSO, DPO, CCC, and OCC are reversed, suggesting that with sufficient liquidity, more lenient working capital policies can actually support profitability. Meanwhile, control variables such as LEV and CASH demonstrate a substantially positive influence on ROA (LEV: 0.016–0.022; CASH: 0.0904–0.1512, p < 0.01), affirming that prudent debt use and ample liquidity buffers enhance performance, whereas SZ negatively affects ROA (–0.0176 to –0.0219, p < 0.01). The study proposes some practical recommendations for working capital management to enhance the profitability of transportation firms.
Journal Article