Working capital management and financial performance of UK listed firms: A contingency approach
Authors: Tingbani, I., Tauringana, V., Damoah, I.S. and Sha'ven, W.B.
Journal: International Journal of Banking Accounting and Finance
Volume: 11
Issue: 2
Pages: 173-201
eISSN: 1755-3849
ISSN: 1755-3830
DOI: 10.1504/IJBAAF.2020.106708
Abstract:Existing empirical research findings generally suggest that working capital management (WCM) affects and the firms' financial performance. This paper adopts contingency theory framework to investigate how the relationship between WCM and financial performance is affected by the firms' environment, resources and management capability. Our sample consist of an unbalanced panel of 802 firms listed on the London Stock Exchange (LSE) from 2004 to 2014 on which a dynamic panel data analysis was performed using a series of interactive models to estimate the relationship. The findings suggest that the impact of WCM on financial performance changes to reflect number contingency variables such as environmental, resources and management capabilities of the firm. These findings are significant because they demonstrate for the first time how the firms' ability to enhance performance through investment in working capital is influenced by contingent factors such as environmental, resource and management capabilities of the firm. Our results are also important as they show that contingency theory helps to provide an understanding on the conditions under which investment in working capital can be an effective tool in enhancing financial performance and the relevant contingencies.
https://eprints.bournemouth.ac.uk/30983/
Source: Scopus
Working Capital Management and Financial Performance of UK Listed Firms: A Contingency Approach
Authors: Tingbani, I., Tauringana, V., Damoah, I.S. and Sha'ven, W.B.
Journal: International Journal of Banking, Accounting and Finance
Abstract:Existing empirical research findings generally suggest that working capital management (WCM) affects and the firms’ financial performance. This paper adopts contingency theory framework to investigate how the relationship between WCM and financial performance is affected by the firms’ environment, resources and management capability. Our sample consist of an unbalanced panel of 802 firms listed on the London Stock Exchange (LSE) from 2004 to 2014 on which a dynamic panel data analysis was performed using a series of interactive models to estimate the relationship. The findings suggest that the impact of WCM on financial performance changes to reflect number contingency variables such as environmental, resources and management capabilities of the firm. These findings are significant because they demonstrate for the first time how the firms’ ability to enhance performance through investment in working capital is influenced by contingent factors such as environmental, resource and management capabilities of the firm. Our results are also important as they show that contingency theory helps to provide an understanding on the conditions under which investment in working capital can be an effective tool in enhancing financial performance and the relevant contingencies.
https://eprints.bournemouth.ac.uk/30983/
Source: Manual
Working Capital Management and Financial Performance of UK Listed Firms: A Contingency Approach
Authors: Tingbani, I., Tauringana, V., Damoah, I.S. and Sha'ven, W.B.
Journal: International Journal of Banking, Accounting and Finance
Volume: 11
Issue: 2
Publisher: Inderscience
ISSN: 1755-3849
DOI: 10.1504/IJBAAF.2020.106708
Abstract:Existing literature has made several theoretical and empirical contributions on the relationship between working capital management (WCM) and financial performance (Aktas, Croci, and Petmezas 2015; Baños-Caballero, García-Teruel, and Martínez-Solano 2010; Deloof 2003; de Almeida and Eid 2014). Evidence from these studies supports the traditional belief that WCM affects firm’s financial performance, risk and consequently its value (Aktas et al., 2015). Despite the strengths of these theoretical and empirical arguments, a number of empirical studies indicate that firms policies change over time as they adjust to the demands of their environment (Rueda-Manzanares, Aragón-Correa and Sharma, 2008; Ambrosini, Bowman and Collier, 2009; Otley, 2016), their resource (Mol and Wijnberg, 2011) and management capabilities (Luo, Kanuri and Andrews, 2014) with the view influencing their financial performance. For example, according to the structure-conduct-performance (SCP) model, the degree of concentration in the industry determines firm behaviour and performance. This is because higher concentration enables collusion between firms which leads to higher profits. It has also been suggested that industrial characteristics such as industry concentration often results in barriers to entry for new firms and enable established firms to share industry profits among themselves (Porter, 1980).
https://eprints.bournemouth.ac.uk/30983/
Source: Manual
Working Capital Management and Financial Performance of UK Listed Firms: A Contingency Approach
Authors: Tingbani, I., Tauringana, V., Damoah, I.S. and Sha'ven, W.B.
Journal: International Journal of Banking, Accounting and Finance
Volume: 11
Issue: 2
Pages: 173-201
ISSN: 1755-3830
Abstract:Existing literature has made several theoretical and empirical contributions on the relationship between working capital management (WCM) and financial performance (Aktas, Croci, and Petmezas 2015; Baños-Caballero, García-Teruel, and Martínez-Solano 2010; Deloof 2003; de Almeida and Eid 2014). Evidence from these studies supports the traditional belief that WCM affects firm’s financial performance, risk and consequently its value (Aktas et al., 2015). Despite the strengths of these theoretical and empirical arguments, a number of empirical studies indicate that firms policies change over time as they adjust to the demands of their environment (Rueda-Manzanares, Aragón-Correa and Sharma, 2008; Ambrosini, Bowman and Collier, 2009; Otley, 2016), their resource (Mol and Wijnberg, 2011) and management capabilities (Luo, Kanuri and Andrews, 2014) with the view influencing their financial performance. For example, according to the structure-conduct-performance (SCP) model, the degree of concentration in the industry determines firm behaviour and performance. This is because higher concentration enables collusion between firms which leads to higher profits. It has also been suggested that industrial characteristics such as industry concentration often results in barriers to entry for new firms and enable established firms to share industry profits among themselves (Porter, 1980).
https://eprints.bournemouth.ac.uk/30983/
Source: BURO EPrints