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Working capital management and firm performance of small and large firms in Malaysia


Mohd Ashhari, Zariyawati and Mohd Tahir, Hirnissa and Faizal, Diana Rose (2017) Working capital management and firm performance of small and large firms in Malaysia. Journal of Global Business and Social Entrepreneurship, 3 (7). pp. 166-177. ISSN 2462-1714


Working capital always being disregard in financial decision making since it involve investment and financing in short term period. However, it is an important component in firm financial management decision. An optimal working capital management is expected to contribute positively to the creation of firm value. To reach optimal working capital management firm manager should control the trade off between profitability and liquidity accurately. The intention of this study is to examine the relationship between working capital management and firm profitability. Cash conversion cycle is used as measure of working capital management. This study is used panel data of 1628 firm-year for the period of 1996-2006 that consist of six different economic sectors which are listed in Bursa Malaysia. The coefficient results of Pooled OLS regression analysis provide a strong negative significant relationship between cash conversion cycle and firm profitability. This reveals that reducing cash conversion period results to profitability increase. Thus, in purpose to create shareholder value, firm manager should concern on shorten of cash conversion cycle till optimal level is achieved.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Publisher: Global Business and Social Entrepreneurship Resources
Keywords: Large firms; Panel data analysis; Small firms; Working capital management; Return on assets
Depositing User: Mohd Hafiz Che Mahasan
Date Deposited: 30 Nov 2018 03:32
Last Modified: 23 Oct 2019 06:45
URI: http://psasir.upm.edu.my/id/eprint/63727
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