Is working capital management value-enhancing? Evidence from firm performance and investments

Aktas, Nihat; Croci, Ettore; Petmezas, Dimitris

Abstract

We examine the value effect of working capital management (WCM) for a large sample of US firms between 1982–2011. Our results indicate (i) the existence of an optimal level of working capital policy; and (ii) firms that converge to that optimal level (either by increasing or decreasing their investment in working capital) improve their stock and operating performance. We also document that corporate investment is the channel through which efficient WCM translates into superior firm performance. In particular, efficient WCM allows firms to redeploy underutilized corporate resources to higher-valued use, such as the funding of cash acquisitions.

Citation

Aktas, N., Croci, E., & Petmezas, D. (2015). Is working capital management value-enhancing? Evidence from firm performance and investments. Journal of Corporate Finance, 30, 98-113. https://doi.org/10.1016/j.jcorpfin.2014.12.008

• Journal Article Type: Article
• Acceptance Date: Dec 18, 2014
• Online Publication Date: Dec 24, 2014
• Publication Date: 2015-02
• Deposit Date: Jul 29, 2020
• Publicly Available Date: Jul 29, 2020
• Journal: Journal of Corporate Finance
• Print ISSN: 0929-1199
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 30
• Pages: 98-113
• DOI: https://doi.org/10.1016/j.jcorpfin.2014.12.008
• Public URL: https://durham-repository.worktribe.com/output/1264968
• Related Public URLs: https://epubs.surrey.ac.uk/820735/