Does working capital management influence operating and market risk of firms?

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F62690094%3A18450%2F21%3A50018681" target="_blank" >RIV/62690094:18450/21:50018681 - isvavai.cz</a>

Result on the web

<a href="https://www.mdpi.com/2227-9091/9/11/201/htm" target="_blank" >https://www.mdpi.com/2227-9091/9/11/201/htm</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.3390/risks9110201" target="_blank" >10.3390/risks9110201</a>

Result language

angličtina

Original language name

Does working capital management influence operating and market risk of firms?

Original language description

Extant empirical studies have predominantly focused on the nexus between working capital management (WCM) and corporate profitability. While there is a dearth of literature on the nexus between WCM and a firm’s risk, the present study examines Pakistani-listed firms coming from 12 diverse industrial segments to observe this association for a time span of ten years (2005–2014). To ensure robustness, we employed a System Generalized Method of Moments (SGMM) regression estimation to investigate the influence of WCM on the operational and market risk for firms. Empirical testing revealed that higher working capital levels were associated with lower volatility in firms’ stock price, which shows that shareholders prefer a conservative working capital policy. Moreover, firms with better cash positions were subject to lesser stock market volatility. In contrast, excess working capital and a larger net trade cycle were associated with increased volatility in the operating income. Besides, firms with lower working capital levels relative to their respective industry experienced fewer fluctuations in their operating profits. Our findings assert that short-term financial management has important ramifications for firms’ operating and market fundamentals. Practical implications are discussed for corporate managers and relevant stakeholders. © 2021 by the authors. Licensee MDPI, Basel, Switzerland.

Czech name

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Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

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OECD FORD branch

50204 - Business and management

Project

—

Continuities

S - Specificky vyzkum na vysokych skolach

Publication year

2021

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Risks

ISSN

2227-9091

e-ISSN

—

Volume of the periodical

9

Issue of the periodical within the volume

11

Country of publishing house

CH - SWITZERLAND

Number of pages

20

Pages from-to

"Article Number: 201"

UT code for WoS article

000727857400001

EID of the result in the Scopus database

2-s2.0-85119073718