Effects of the 2008 Financial Crisis on the Working Capital Management Policy of U.S. Enterprises

Chong-Chuo Chang, Tai-Yung Kam, Yu-Cheng Chang and Chen-Chen Liu
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Chong-Chuo Chang: Department of Banking and Finance, College of Management, National Chi Nan University, Taiwan (R.O.C.)
Tai-Yung Kam: International College,Guangzhou College of Commerce, China
Yu-Cheng Chang: Department of Leisure and Recreation Management, College of Management, Asia University, Taiwan (R.O.C.)
Chen-Chen Liu: Department of Finance, College of Management, Asia University, Taiwan (R.O.C.)

International Journal of Business and Economics, 2019, vol. 18, issue 2, 121-140

Abstract: The literature has not extensively examined the effects of the 2008 financial crisis on the working capital management of U.S. enterprises. That economic turmoil may have caused enterprises to encounter a lack of funds owing to the severe credit crunch, financial constraints, poor liquidity, and other factors, thereby adversely affecting their working capital management policies. This study thus investigates the effects of this global crisis on the working capital management policy of U.S. enterprises using panel data regression with fixed effects. Results reveal no significant effect on the cash conversion cycle (CCC), implying that a financial crisis has no effect on the speed of working capital collection. However, firms with relatively low current and quick ratios during and after a financial crisis period should pay more attention to their liquidity management strategies or take actions prior to the eruption of a crisis so as to prevent themselves from slipping into a liquidity crisis that in turn weakens their financial situation and leads to financial difficulties.

Keywords: working capital management policy; financial crisis; liquidity management policy (search for similar items in EconPapers)
JEL-codes: G01 G30 G32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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