An Investigation into Efficiency of Working Capital by Chemical Firms in Pakistan

Shahid Ali (), Muhammad Mohsin Khan and Muhammad Nouman
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Shahid Ali: Institute of Management Sciences, Peshawar
Muhammad Mohsin Khan: Institute of Management Sciences, Peshawar
Muhammad Nouman: Institute of Management Sciences, Peshawar

Business & Economic Review, 2011, vol. 3, issue 2, 198-217

Abstract: Financial policy making is deemed essential for achieving higher economic dividends. There is a need to study the neglected area of working capital management with special emphasis on its efficiency. This paper directs attention to study this topic for listed chemical sector of Pakistan. The current practice is examined in light of a nine year panel data from the State Bank of Pakistan. Reviewed literature identifies vacuums that attract attention and invite research openings. The criticism on contemporary method of using ratios towards managing working capital is noticeable. Three indices namely a utilization index, a performance index and an efficiency index are identified and computed for all firms and for industry as a whole to get a broader picture. Regression analysis is used to observe the level of change in these firms towards achieving more efficiency. The study concludes that the chemical sector of Pakistan is managing its working capital only satisfactorily and over the years the efficiency level is disproving. The firms are not taking a fuller advantage of their employed current assets towards value maximization

Keywords: Corporate finance; working capital management; efficiency (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:bec:imsber:v:3:y:2011:i:2:p:198-217

DOI: 10.22547/BER/3.2.6

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