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Impact of Working Capital Management on Firm’s Profitability: Empirical Evidence from Vietnam

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National Economics University, NGUYEN, Anh Huu, PHAM, Huong Thanh, NGUYEN, Hang Thu·2020·The Journal of Asian Finance, Economics and Business
DOI 10.13106/jafeb.2020.vol7.no3.115
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Abstract

This paper investigates the impact of working capital management on the firm's profitability using listed companies on the Vietnam stock market.

AI snapshot

Written from the paper’s full text.

TL;DR

This study examines whether working capital management affects profitability among Vietnamese listed industrial firms from 2010 to 2018. It finds that longer cash conversion cycles and longer receivable, inventory, and payable periods are associated with lower accounting and market profitability.

Key findings

  • The cash conversion cycle (CCC) had a negative and statistically significant effect on both ROA and Tobin’s Q; the FEM coefficients were -0.00002 for ROA (5% level) and -0.00004 for Tobin’s Q (1% level).
  • Its three components also showed negative significant effects: accounts receivable turnover in days (ARD) at -0.00004 for ROA and -0.0006 for Tobin’s Q; inventory turnover in days (INVD) at -0.00005 for ROA and -0.00006 for Tobin’s Q; and accounts payable turnover in days (APD) at -0.00005 for ROA and -0.00002 for Tobin’s Q.
  • Control variables mattered: sales growth and firm size generally had positive effects, leverage had negative effects, and firm age was negative for ROA but positive for Tobin’s Q; the current ratio was not significantly related to profitability.
  • Descriptive statistics for the 1,071 observations show average ROA of 3.5%, average Tobin’s Q of 1.03, average CCC of 116.5 days, average ARD of 55.5 days, average INVD of 94.4 days, and average APD of 33.4 days.

Methods

  • The sample began with 226 industrial firms listed on Vietnam’s Hanoi and Ho Chi Minh City stock exchanges; after excluding 83 firms without complete financial statements and 24 abnormal firms, the final panel covered 119 firms and 1,071 firm-year observations from 2010 to 2018.
  • Profitability was measured by ROA and Tobin’s Q; working capital management was measured by CCC, ARD, INVD, and APD; controls were sales growth, firm size, leverage, firm age, and current ratio.
  • The paper used OLS, Redundant Fixed Effects tests, and Hausman tests, ultimately relying on fixed effects models because the tests indicated OLS was inappropriate and fixed effects were preferred.

Limitations

  • The paper does not state a limitations section.
  • Evident from the text: the evidence is limited to listed industrial firms in Vietnam over 2010–2018, so findings may not generalize to other sectors, countries, or periods.
  • Evident from the text: the sample excludes firms with incomplete statements and abnormal observations, and the model focuses on internal determinants while external market, industry, and economic factors are not included.

Model-written summary. Check it against the paper before relying on it.

Integrity signals

Registry

Crossref · 10.13106/jafeb.2020.vol7.no3.115

Cites

13 of 13 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

0 of 12 cited sources checked · 0 supported · 0 flagged

  • Findingown data

    Sale growth rate (SG) has a significant positive correlation with return on assets (ROA) for the sampled firms.

    “The results of correlation analysis for the ROA indicates the significant negative coefficient with ARD (-0.266);INVD (-0.27);APD (-0.251);CCC (-0.232);FS (-0.068);LEV (-0.272);AGE (-0.055) and the significant positive coefficient with SG (0.307); CR (0.074).”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.
    • Rests on an assumption: The financial statement data used in the study are accurate and reliable.
  • Findingown data

    Current ratio (CR) has a significant positive correlation with return on assets (ROA) for the sampled firms.

    “The results of correlation analysis for the ROA indicates the significant negative coefficient with ARD (-0.266);INVD (-0.27);APD (-0.251);CCC (-0.232);FS (-0.068);LEV (-0.272);AGE (-0.055) and the significant positive coefficient with SG (0.307); CR (0.074).”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.
    • Rests on an assumption: The financial statement data used in the study are accurate and reliable.
  • Findingown data

    Accounts payable turnover in days (APD) has a significant negative correlation with return on assets (ROA) for the sampled firms.

    “The results of correlation analysis for the ROA indicates the significant negative coefficient with ARD (-0.266);INVD (-0.27);APD (-0.251);CCC (-0.232);FS (-0.068);LEV (-0.272);AGE (-0.055) and the significant positive coefficient with SG (0.307); CR (0.074).”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.
    • Rests on an assumption: The financial statement data used in the study are accurate and reliable.
  • Findingown data

    Accounts receivable turnover in days (ARD) has a significant negative correlation with return on assets (ROA) for the sampled firms.

    “The results of correlation analysis for the ROA indicates the significant negative coefficient with ARD (-0.266);INVD (-0.27);APD (-0.251);CCC (-0.232);FS (-0.068);LEV (-0.272);AGE (-0.055) and the significant positive coefficient with SG (0.307); CR (0.074).”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.
    • Rests on an assumption: The financial statement data used in the study are accurate and reliable.
  • Findingown data

    Firm age (AGE) has a significant negative correlation with return on assets (ROA) for the sampled firms.

    “The results of correlation analysis for the ROA indicates the significant negative coefficient with ARD (-0.266);INVD (-0.27);APD (-0.251);CCC (-0.232);FS (-0.068);LEV (-0.272);AGE (-0.055) and the significant positive coefficient with SG (0.307); CR (0.074).”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.
    • Rests on an assumption: The financial statement data used in the study are accurate and reliable.
  • The quote only partly states this claim. 1
  • Classified as probably not a substantial claim. 7
  • May combine two claims. 1

  • The quote only partly states this claim.

    Interpretationown data

    Optimizing working capital management by shortening the cash conversion cycle (including reducing collection time, accelerating inventory flow, and reducing payment time to creditors) can increase firm profitability.

    “It implies that firms can increase profitability by keeping the optimization of the working capital management measured by the CCC, which includes shortening the time to collect money from clients, accelerating inventory flow and hold the low payment time to creditors.”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.
    • Rests on an assumption: The financial statement data used in the study are accurate and reliable.

  • Classified as probably not a substantial claim.

    Study design and conductreasoning

    The study used the Redundant Fixed Effects test to verify the need for constraints relating to table units and time points in the FEM.

    “the authors use the Redundant Fixed Effects to verify the need for constraints relating to table units and time points in the FEM.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Prior empirical studies have found that the cash conversion cycle (CCC) has a negative impact on profitability.

    “Almost previous empirical studies examined and concluded that the CCC had a negative impact on the profitability as Deloof (2003); Lazaridis and Tryfonidis (2006); Mohamad and Saad (2010); Sharma and Kumar (2011);Vural, Sokmen and Cenenak (2012); Gul et al. (2013); Tu and Nguyen (2014); Bui (2016), and Muhammad, Rehman, and Waqas (2016).”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites Deloof (2003) source
    • cites Lazaridis and Tryfonidis (2006)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Mohamad and Saad (2010) source

  • Classified as probably not a substantial claim.

    Study design and conductreasoning

    The study used the Hausman Test to assure findings are robust.

    “In addition to the OLS model, the paper use the Hausman Test to assure findings are robust.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Study design and conductreasoning

    The study used the Hausman Test to determine the exogeneity of unobserved errors and choose between the Fixed Effects Model (FEM) and Random Effects Model (REM).

    “we use the Hausman Test which applied to determine the exogeneity variables of the unobserved errors and choose between the Fixed Effects Model (FEM) and Random Effects Model (REM).”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Prior empirical studies have found that inventory turnover in days (INVD) has a negative impact on profitability.

    “The previous empirical studies tested and concluded that the inventory turnover in days (INVD) had a negative impact on the profitability as Deloof (2003); Lazaridis and Tryfonidis (2006); Gul et al. (2013); Tu and Nguyen (2014); Bui (2016); and Muhammad, Rehman, and Waqas (2016).”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites Deloof (2003) source
    • cites Lazaridis and Tryfonidis (2006)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Gul et al. (2013)

  • Classified as probably not a substantial claim.

    Study design and conductnone given

    The study employed Ordinary least squares (OLS) and fixed effects model (FEM) to address econometric issues and improve the accuracy of the regression coefficients.

    “Two statistical approaches include Ordinary least squares (OLS) and fixed effects model (FEM) are employed to address econometric issues and to improve the accuracy of the regression coefficients.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Study design and conductown data

    The Redundant Fixed Test indicated that OLS was not appropriate, and the Hausman test rejected the null hypothesis, leading to the selection of the fixed effects model (FEM) for analyzing the relationship between working capital management and profitability.

    “Firstly, the results of the Redundant Fixed Test for all models reveal that the Probability of Cross-sections F and Cross-Sections Chisquare are both 0.000 < 0.05.It means that the OLS is not appropriate; we use the results of REM/FEM to analyze the regression between the WCM and profitability.Secondly, the results of the Hausman test have P-value < 5%, thus rejecting the null hypothesis and selec”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Prior empirical studies have found that accounts receivable turnover in days (ARD) has a negative effect on profitability.

    “Almost previous empirical studies tested and concluded that the ARD had a negative effect on the profitability as Deloof (2003); Lazaridis and Tryfonidis (2006); Sharma and Kumar (2011);Vural, Sokmen, and Cenenak (2012); Gul et al. (2013); Tu and Nguyen (2014); Bui (2016); and Muhammad, Rehman, and Waqas (2016).”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites Deloof (2003) source
    • cites Lazaridis and Tryfonidis (2006)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Sharma and Kumar (2011) source
9 of 9

  • The paper relies on this without support.

    The sample of 119 industrial enterprises is representative of the population of listed industrial enterprises on the Vietnamese stock market.

    “The research sample includes 119 non-financial listed companies on Vietnam stock market over a period of 9 years from 2010 to 2018.”
    “From this approach, the authors collect a panel data of 119 enterprises and a total of 1071 observations during the 9 years from 2010 to 2018.”

  • The paper relies on this without support.

    The financial statement data used in the study are accurate and reliable.

    “Data used in the study is randomly collected from the financial statements of 226 industrial enterprises listed on the Vietnamese stock market, including the Ha Noi Stock Exchange and Ho Chi Minh City Stock Exchange over the 9 years from 2010 to 2018.”

  • The paper relies on this without support.

    The observed negative relationship between working capital management (and its components) and profitability reflects a causal effect of working capital management on profitability, rather than reverse causality or omitted variable bias.

    “This shows that the shorter the CCC, the higher the profitability of a business.”

  • The paper relies on this without support.

    The sample of 119 industrial enterprises listed on the Vietnamese stock market from 2010 to 2018 is representative of industrial firms in Vietnam, so the findings generalize to industrial firms.

    “119 industrial enterprises listed on the Vietnamese stock market for the 9 year period from 2010 to 2018.”
4 of 4

Claims other papers make about this one

Each is checked against this paper’s own text: does it say what the citing paper says it does?

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

Each contradiction between two passages listed here was confirmed by an independent check.

  • INVD-Tobin's Q coefficient is misstated tenfold

    Major

    The regression discussion gives the FEM coefficient as −0.00006, while Table 5 gives −0.0006.

  • APD's effect on Tobin's Q is called significant despite p = 0.340

    Major

    The paper concludes that the APD effect on market-value profitability is statistically significant. Table 6 gives the FEM APD coefficient a p-value of 0.340, which does not support that conclusion.

  • APD-Tobin's Q coefficient is misstated tenfold

    Major

    The regression discussion gives the FEM coefficient as −0.00002, while Table 6 gives −0.0002. This discrepancy affects the stated size of a central result.

  • Tobin's Q correlations reverse the signs for size and age

    Minor

    The text lists negative correlations for FS and AGE, but Table 3 reports positive correlations of 0.022 and 0.110, respectively.

  • Payment-time advice conflicts with the stated CCC formula

    Minor

    The conclusion describes reducing payment time as part of shortening the CCC. Under the paper's formula, APD is subtracted, so reducing APD would increase the CCC if the other components stayed fixed.

  • Firm-size correlation is called significant despite its p-value

    Minor

    The text calls the FS-Tobin's Q correlation significant, but Table 3 reports a p-value of 0.466 for it.

  • Two different mean CCC values are reported

    Minor

    The descriptive statistics give a mean CCC of 116.541 days, which rounds to 116.5 days, not the later figure of 116.3 days.

  • CCC minimum loses its negative sign

    Minor

    The text reports a minimum CCC of 387 days, whereas the descriptive-statistics tables give −387.427 days.

  • CCC-Tobin's Q coefficient is misstated tenfold

    Minor

    The regression discussion gives the FEM coefficient as −0.00004, while Table 7 gives −0.0004.

9 of 9

Cites

Flagged first, then by citations

Research works printed but not linked: 7

  1. Bui, N. T., (2016). The effect of working capital management on the return on assets of Vietnamese real estate companies. Can Tho University Journal of Science, 44(1), 18-27.
  2. Guthmann, H. G., & Dougall, H. E. (1948). Corporate Financial Policy (2nd ed.). New York, NY: Prentice-Hall, Inc.
  3. Horward, B. B., & Upton, M. (1953). Introduction to Business Finance (1st ed.). New York, NY: McGraw Hill.
  4. Shin, H. H., & Soenen, L. (1998). Efficiency of working capital management and corpo-rate profitability. Financial Practice and Education, 8(2), 37-45.
  5. Taleb, G. A., Zoued, A. N., & Shubiri, F. N. (2010). The determinants of effective working capital management policy: a case study on Jordan. Interdisciplinary Journal of Contemporary Research in Business, 2(4), 248-264.
  6. Tu, T. K. T., & Nguyen, T. U. U. (2014). The relatioship between the worrking capital management and the profitability: experimental evidence in Vietnam. Journal of Development and Integration, 14(24), 62-70.
  7. Van Horne, J. C. (2008). Fundamentals of Financial Management (13th ed). Upper Saddle River, NJ: Prentice Hall

Cited by

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Related

Authors
National Economics University, NGUYEN, A. H., PHAM, H. T., & NGUYEN, H. T.
Affiliations
National Economics University (VN)
ORCID
Venue
The Journal of Asian Finance, Economics and Business
Publisher
Korea Distribution Science Association
Published
2020-03-31
Volume
7
Issue
3
Pages
115-125
ISSN
  • 2288-4637 (ISSN-L)
  • 2288-4645
DOI
10.13106/jafeb.2020.vol7.no3.115
OpenAlex
W3012407004
Cited by
90
References
12
Citations by year
2026: 5 · 2025: 3 · 2024: 16 · 2023: 25 · 2022: 16 · 2021: 13 · 2020: 12
FWCI
30.66
Type
journal article
Language
en
Open access
Locations
Journal of Asian Finance Economics and Business (publishedVersion)
Funders
Đại học Kinh tế Quốc dân
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
  • Social Sciences › Business, Management and Accounting › Management Information Systems › Supply Chain and Inventory Management
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
Keywords
working capital management, firm profitability, cash conversion cycle, receivables turnover, inventory turnover, accounts payable turnover, return on assets, Tobin's Q, non-financial listed companies, Vietnamese stock market, firm size, leverage, firm age

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Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Claims read by deepseek-v4.1-flash under definition version 3 (extract-v3) on 2026-10-11.

Classified by jev-1.13-20260917 (gold-guideline-v0.2) on 2026-10-11.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

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