Working capital management practices in India : Survey evidence
- Authors: Baker, Kent , Kumar, Satish , Colombage, Sisira , Singh, Harsh
- Date: 2017
- Type: Text , Journal article
- Relation: Managerial Finance Vol. 43, no. 3 (2017), p. 331-353
- Full Text: false
- Reviewed:
- Description: Purpose: The purpose of this paper is to investigate the working capital management (WCM) practices adopted by Indian firms listed on the National Stock Exchange (NSE). Design/methodology/approach: Using a questionnaire, the authors gather data from 110 financial managers and use various statistical techniques to test for statistical significance. Findings: The evidence shows that the majority (54.5 percent) of sample firms follow a moderate approach in financing their activities, which involves a trade-off between liquidity and profitability. Respondents tend to use an informal approach for WCM and consider receivables management as the most important component of WCM. In terms of WCM monitoring and financial measures, respondents mainly consider the cash conversion cycle and net working capital. Indian firms tend to use centralized cash management and rely heavily on material requirement planning (MRP) and enterprise resource planning (ERP) for proper inventory management. Research limitations/implications: Tests involving firm size, foreign sales, and average age do not differ significantly between the NSE-listed firms and the sample firms. This evidence lessens concerns of non-response bias and the ability to generalize the findings to Indian firms. Originality/value: By updating and extending previous research on WCM, this study fills a gap in the literature by providing insights into practices adopted by Indian firms in managing WCM and its components. © 2017, © Emerald Publishing Limited.
Working capital management and firm profitability : a Meta-analysis
- Authors: Singh, Harsh , Kumar, Satish , Colombage, Sisira
- Date: 2017
- Type: Text , Journal article
- Relation: Qualitative Research in Financial Markets Vol. 9, no. 1 (2017), p. 34-47
- Full Text: false
- Reviewed:
- Description: Purpose: The purpose of this study is to quantitatively aggregate the findings of prior literature on the effect of working capital management (WCM) on corporate profitability using the meta-analysis technique developed by Hunter et al. (1982). Design/methodology/approach: A set of 46 research articles that directly studied the relationship between WCM, and profitability was analyzed for the purpose. In addition to overall meta-analysis, a detailed subgroup study was also conducted to test whether the differences in results are due to moderating effects related to different profitability proxies, economic development of a specific country and size of the firms under study. Findings: The findings of this meta-analysis confirm that WCM is negatively associated with profitability, which means an aggressive WCM policy leads to higher profitability. Overall, and in all the subgroup studies, the cash conversion cycle was found to be negatively associated with profitability. Originality/value: Unlike narrative literature review papers, this meta-analysis provides quantitatively aggregate evidence on the relationship of WCM and firms’ profitability. To the best of authors’ knowledge, no previous meta-analysis paper is published on the topic. © 2017, © Emerald Publishing Limited.
Research on capital structure determinants : A review and future directions
- Authors: Kumar, Satish , Colombage, Sisira , Rao, Purnima
- Date: 2017
- Type: Text , Journal article , Review
- Relation: International Journal of Managerial Finance Vol. 13, no. 2 (2017), p. 106-132
- Full Text: false
- Reviewed:
- Description: Purpose: The purpose of this paper is to study the status of studies on capital structure determinants in the past 40 years. This paper highlights the major gaps in the literature on determinants of capital structure and also aims to raise specific questions for future research. Design/methodology/approach: The prominence of research is assessed by studying the year of publication and region, level of economic development, firm size, data collection methods, data analysis techniques and theoretical models of capital structure from the selected papers. The review is based on 167 papers published from 1972 to 2013 in various peer-reviewed journals. The relationship of determinants of capital structure is analyzed with the help of meta-analysis. Findings: Major findings show an increase of interest in research on determinants of capital structure of the firms located in emerging markets. However, it is observed that these regions are still under-examined which provides more scope for research both empirical and survey-based studies. Majority of research studies are conducted on large-sized firms by using secondary data and regression-based models for the analysis, whereas studies on small-sized firms are very meager. As majority of the research papers are written only at the organizational level, the impact of leverage on various industries is yet to be examined. The review highlights the major determinants of capital structure and their relationship with leverage. It also reveals the dominance of pecking order theory in explaining capital structure of firms theoretically as well as statistically. Originality/value: The paper covers a considerable period of time (1972-2013). Among very few review papers on capital structure research, to the best of authors’ knowledge; this is the first review to identify what is missing in the literature on the determinants of capital structure while offering recommendations for future studies. It also synthesize the findings of empirical studies on determinants of capital structure statistically. © 2017, © Emerald Publishing Limited.