TY - JOUR
T1 - Is working capital management value-enhancing? Evidence from firm performance and investments
AU - Aktas, Nihat
AU - Croci, Ettore
AU - Petmezas, Dimitris
PY - 2015
Y1 - 2015
N2 - 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.
AB - 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.
KW - Working capital management
KW - Working capital management
UR - http://hdl.handle.net/10807/64718
UR - http://www.sciencedirect.com/science/article/pii/s0929119914001606
U2 - 10.1016/j.jcorpfin.2014.12.008
DO - 10.1016/j.jcorpfin.2014.12.008
M3 - Article
SN - 0929-1199
VL - 30
SP - 98
EP - 113
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
ER -