Working Capital Management and Shareholders’ Wealth
Abstract
We provide the first empirical study of the relationship between corporate working capital management and shareholders’ wealth. Examining US corporations from 1990 through 2006, we find evidence that: the incremental dollar invested in net operating working capital is worth less than the incremental dollar held in cash for the average firm; the valuation of the incremental dollar invested in net operating working capital is significantly influenced by a firm’s future sales expectations, its debt load, its financial constraints, and its bankruptcy risk; and the value of the incremental dollar extended in credit to one’s customers has a greater effect on shareholders’ wealth than the incremental dollar invested in inventories for the average firm.
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Does Working Capital Management Affect Profitability of Belgian Firms?
Deloof, M. (2003) · Journal of Business Finance & Accounting · doi:10.1111/1468-5957.00008 · Cited by 1,849 · see citing works
Is working capital management value-enhancing? Evidence from firm performance and investments
Aktas, N., Croci, E., & Petmezas, D. (2015) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2014.12.008 · Cited by 534 · see citing works
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Is working capital management value-enhancing? Evidence from firm performance and investments
Aktas, N., Croci, E., & Petmezas, D. (2015) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2014.12.008 · Cited by 534 · see citing works
Working capital management: Evidence from Norway
Lyngstadaas, H., & Berg, T. (2016) · International Journal of Managerial Finance · doi:10.1108/ijmf-01-2016-0012 · Cited by 139 · see citing works
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“The competing view argues that firms are likely to go bankrupt with higher WCI, as they require more financing requirements with additional financing expenses (Kieschnick et al., 2013).”
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Working capital management and firm performance in China
Ren, T., Liu, N., Yang, H., Xiao, Y., & Hu, Y. (2019) · Asian Review of Accounting · doi:10.1108/ara-04-2018-0099 · Cited by 65 · see citing works
Sawarni, K. S., Narayanasamy, S., & Ayyalusamy, K. (2020) · International Journal of Productivity and Performance Management · doi:10.1108/ijppm-10-2019-0468 · Cited by 58 · see citing works
The effect of economic uncertainty on inventory and working capital for manufacturing firms
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Working capital, cash flow and profitability of intensive MSMEs: Evidence from Ecuador
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- Authors
- Kieschnick, R., Laplante, M., & Moussawi, R.
- Affiliations
- The University of Texas at Dallas (US)
- Venue
- Review of Finance
- Publisher
- Oxford University Press (OUP)
- Published
- 2013-01-11
- Volume
- 17
- Issue
- 5
- Pages
- 1827-1852
- ISSN
- 1382-6662 (ISSN-L)
- 1573-692X
- 1572-3097
- OpenAlex
- W2147659916
- Cited by
- 330
- References
- 2
- Citations by year
- 2026: 34 · 2025: 21 · 2024: 32 · 2023: 34 · 2022: 41 · 2021: 31 · 2020: 35 · 2019: 29 · 2018: 25 · 2017: 13 · 2016: 19 · 2015: 9 · 2014: 6 · 2013: 1
- FWCI
- 42.93
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- European Finance Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Social Sciences › Business, Management and Accounting › Management Information Systems › Supply Chain and Inventory Management
- Keywords
- working capital management, shareholder value, cash holdings, sales expectations, debt burden, financial constraints, bankruptcy risk, accounts receivable, inventory, business valuation
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