Working capital management: Financial and valuation impacts

This paper examines the longitudinal impact from 1990 to 2017 of continuous improvement programs and aggressive working capital practices on accounts receivable turnover, inventory turnover, days payables outstanding, and cash conversion cycle. We find statistically significant shifts in the means a...

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Bibliographic Details
Published in:Journal of business research 2020-01, Vol.108, p.1-8
Main Authors: Boisjoly, Russell P., Conine, Thomas E., McDonald, Michael B.
Format: Article
Language:English
Subjects:
Corporate finance
Financial accounting
Financial ratios
Financial reporting
Treasury management
Working capital
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Summary:This paper examines the longitudinal impact from 1990 to 2017 of continuous improvement programs and aggressive working capital practices on accounts receivable turnover, inventory turnover, days payables outstanding, and cash conversion cycle. We find statistically significant shifts in the means and in the skew for these variables consistent with stricter financial management and less risk taking in trade credit. The results are strongest in the transportation and communications industry and weakest in financial services. These metrics are associated with equity valuation impacts and with improved profitability as captured by return on invested capital.
ISSN:0148-2963
1873-7978
DOI:10.1016/j.jbusres.2019.09.025