THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM
Working capital management is a daily activity that will determine the availability of resources for the company. There are positive and negative effects in increasing the degree of working capital. There is an optimal degree as well. The degree of optimal working capital for each company is differ...
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| Format: | Article |
| Language: | English |
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Universitas Nahdlatul Ulama Surabaya
2021-11-01
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| Series: | Business and Finance Journal |
| Subjects: | |
| Online Access: | https://journal2.unusa.ac.id/index.php/BFJ/article/view/1970 |
| _version_ | 1818523701692334080 |
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| author | Ninditya Nareswari Nuraini Desty Nurmasari |
| author_facet | Ninditya Nareswari Nuraini Desty Nurmasari |
| author_sort | Ninditya Nareswari |
| collection | DOAJ |
| description |
Working capital management is a daily activity that will determine the availability of resources for the company. There are positive and negative effects in increasing the degree of working capital. There is an optimal degree as well. The degree of optimal working capital for each company is different, depends on financial conditions. This paper aims to examine the effect of non-linear working capital on firm performance and analyze the differences in the degree of optimal working capital between financially constrained and unconstrained firms. Data were obtained from OSIRIS with the observation period 2010-2019. Working capital is proxied by the net trade cycle. This study uses panel data regression models, i.e. fixed effect regression and random effect regression. The result of this study shows that working capital has a non-linear effect (U-shaped inverted) on firm performance when using ROA and ROE as a proxy for performance which means the company has an optimal degree of working capital. The result also shows that financially constrained firms grouped based on cash flow, interest coverage, and cost of external financing have lower optimal working capital which means that the benefits of working capital are more used by non-financially constrained firms.
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| first_indexed | 2024-12-11T05:48:04Z |
| format | Article |
| id | doaj.art-df7f28efdb024ed9adb0f5d8a1c0f017 |
| institution | Directory Open Access Journal |
| issn | 2527-4872 2477-393X |
| language | English |
| last_indexed | 2024-12-11T05:48:04Z |
| publishDate | 2021-11-01 |
| publisher | Universitas Nahdlatul Ulama Surabaya |
| record_format | Article |
| series | Business and Finance Journal |
| spelling | doaj.art-df7f28efdb024ed9adb0f5d8a1c0f0172022-12-22T01:18:55ZengUniversitas Nahdlatul Ulama SurabayaBusiness and Finance Journal2527-48722477-393X2021-11-016210.33086/bfj.v6i2.1970THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRMNinditya Nareswari0Nuraini Desty Nurmasari1Institut Teknologi Sepuluh NopemberUniversitas Gadjah Mada Working capital management is a daily activity that will determine the availability of resources for the company. There are positive and negative effects in increasing the degree of working capital. There is an optimal degree as well. The degree of optimal working capital for each company is different, depends on financial conditions. This paper aims to examine the effect of non-linear working capital on firm performance and analyze the differences in the degree of optimal working capital between financially constrained and unconstrained firms. Data were obtained from OSIRIS with the observation period 2010-2019. Working capital is proxied by the net trade cycle. This study uses panel data regression models, i.e. fixed effect regression and random effect regression. The result of this study shows that working capital has a non-linear effect (U-shaped inverted) on firm performance when using ROA and ROE as a proxy for performance which means the company has an optimal degree of working capital. The result also shows that financially constrained firms grouped based on cash flow, interest coverage, and cost of external financing have lower optimal working capital which means that the benefits of working capital are more used by non-financially constrained firms. https://journal2.unusa.ac.id/index.php/BFJ/article/view/1970financial constraintsfirm performanceworking capital management |
| spellingShingle | Ninditya Nareswari Nuraini Desty Nurmasari THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM Business and Finance Journal financial constraints firm performance working capital management |
| title | THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM |
| title_full | THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM |
| title_fullStr | THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM |
| title_full_unstemmed | THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM |
| title_short | THE WORKING CAPITAL MANAGEMENT ON FINANCIALLY CONSTRAINED FIRM |
| title_sort | working capital management on financially constrained firm |
| topic | financial constraints firm performance working capital management |
| url | https://journal2.unusa.ac.id/index.php/BFJ/article/view/1970 |
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