Working capital management and shareholders' value creation in the emerging Asian market: the evidence from Indian manufacturing sector

Sangeeta Mittal and Sonali Garg

International Journal of Economics and Accounting, 2022, vol. 11, issue 2, 115-134

Abstract: The recent global financial crisis had made working capital management more significant for the firms owing to its impact on the firm's liquidity and profitability. The objective of this study is to scrutinise the influence of working capital management and its components on shareholders' value creation in the Indian manufacturing sector, as there is a dearth of literature on their relationship. The dependent variable, economic value added is used as a measure of shareholders' value creation to analyse the association between working capital management and shareholders' value creation in selected firms for the period of 2011 to 2019. Using panel data regression methodology, the results showed that shareholders' value creation is significantly affected by working capital management. The study also inferred that shareholders' value creation is positively and significantly affected by the inventory conversion period and accounts payables period. The study recommends that firms with a high level of inventory and having good relations with their suppliers can create more shareholders' value. The managers were also urged to use an aggressive working capital financing policy.

Keywords: working capital; shareholder value; economic value; manufacturing sector; liquidity; profitability. (search for similar items in EconPapers)
Date: 2022
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