Efficiency of working capital management and corporate profitability英文文献.pdfVIP

Efficiency of Worlcing Capitai i\/ianagement and Corporate Profitabiiity Hyun-Han Shin and Luc Soenen Efficient working capital management is an integral part of the overall corporate strategy to create shareholder value. We investigate the relation hetween theftnn s net-trade cycle and its profitability. This relationship is examined using correlation and regression analysis, by industry and working capital intensity. Using a Compustat sample of 58,985 ftrm years covering the period 1975-1994, we ftnd, in all cases, a strong negative relation between the length of the firms net-trade cycle and its profitability. In addition, shorter net- trade cycles are associated with higher risk-adjusted stock returns. [JEL: G30, G32, MIO] • Efficietit workitig capital management is an ititegral beneficial for the companys profitability, A firm can component of the overall corporate strategy to create have larger sales witb a generous credit policy, whicb sbarebolder value . Working capital is the result of the extends the cash cycle . In this case, the longer cash time lag between the expenditure for the purchase of conversion cycle may result in higher profitability . raw materials and the collection for the sale of the However, the traditional view of the relationship finished product . The continuing flow of cash from between tbe cash conversion cycle and corporate suppliers to inventory to accounts receivable and back profitability is that, ceteris paribus , a longer