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The impact of working capital management on shareholders’ wealth and profitability: evidence from Colombo stock exchange

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dc.contributor.author Perera, W
dc.contributor.author Priyashantha, P
dc.date.accessioned 2019-12-19T06:05:10Z
dc.date.available 2019-12-19T06:05:10Z
dc.date.issued 2018
dc.identifier.citation Perera,W , Priyashantha,P. (2018). "The impact of Working Capital Management on shareholders’ wealth and profitability: evidence from Colombo Stock Exchange", Investment Management and Financial Innovations: 15(2), 104-115 en_US
dc.identifier.issn 1810-4967
dc.identifier.uri http://dr.lib.sjp.ac.lk/handle/123456789/8539
dc.description.abstract The Working Capital Management (WCM) has an important role for the firm’s success or failure, because it directly affects the overall business health of the firm. This study examined the impact of WCM on profitability and shareholders’ wealth using 50 companies listed in different sectors on the Colombo Stock Exchange (CSE) for the period from 2010 to 2015. This sample represents 47% of the selected sectors of CSE. The profitability of the company is measured using gross operating profit (GOP) and shareholders wealth measured by Tobin’s Q (TQ) ratio. The WCM is measured using five independent variables namely stock holding period (SHP), debtors’ collection period (DCP), creditors’ settlement period (CSP), cash conversion circle (CCC) and current assets ratio (CAR). Further, three additional variables such as firm size (SIZE), leverage (LEV) and earning yield (EY) are employed as controlling variables to capture the impact of other performance of the companies. The data were analyzed using ordinary least square (OLS) and panel data regression models. These regression models reveal that there is a significant negative relationship between CCC and dependent variables (GOP & TQ). Further, this relationship has been confirmed by the major components of CCC such as SHP, DCP. Firm size also positively and significantly affects the firm GOP, while negatively affects the TQ. Further, they revealed that there is a significant positive relationship between LEV and TQ. The study finds that the shareholders’ wealth and profitability can be increased through the efficiency of WCM. en_US
dc.language.iso en en_US
dc.publisher BUSINESS PERSPECTIVES en_US
dc.subject Working Capital Management, Tobin’s Q, leverage, panel data, cash conversion circle en_US
dc.title The impact of working capital management on shareholders’ wealth and profitability: evidence from Colombo stock exchange en_US
dc.type Article en_US
dc.identifier.doi 10.21511/imfi.15(2).2018.10 en_US


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