Working capital management, board structure and Tobin's q ratio of Thai listed firms

PurposeThis study investigates whether the integration between working capital management (WCM) and the structure of a firm's board of directors impacts its Tobin's q ratio. The sample set consists of 319 Thai listed firms with 3,190 firm-year observations from 2010 to 2019.Design/methodol...

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Bibliographic Details
Published in:Managerial finance 2022-03, Vol.48 (4), p.541-556
Main Authors: Chancharat, Nongnit, Kumpamool, Chamaiporn
Format: Article
Language:English
Subjects:
Accounting
Bankruptcy
Business metrics
Corporate governance
Economic value added
Efficient markets
Financial reporting
Financial statements
Generalized method of moments
Ratios
Research methodology
Return on assets
Securities markets
Stock exchanges
Working capital
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Summary:PurposeThis study investigates whether the integration between working capital management (WCM) and the structure of a firm's board of directors impacts its Tobin's q ratio. The sample set consists of 319 Thai listed firms with 3,190 firm-year observations from 2010 to 2019.Design/methodology/approachThe two-step generalized method of moments (two-step GMM) model is employed to address endogeneity.FindingsThe empirical results show that having both (1) a high level of net working capital holdings, a long period of net trade cycles or using an aggressive policy in working capital investment and (2) a more diverse board of directors decrease a firm's Tobin's q ratio. Conversely, when a firm's managers employ an aggressive policy for their working capital financing and the board structure of their firms is highly diverse, the firm's Tobin's q ratio increases. This indicates the appropriateness of some WCM policies is dependent on the characteristics of a firm's board of directors. Thus, the different integration between WCM and board structure may elicit dissimilar outcomes for a firm's Tobin's q ratio.Originality/valueTo their knowledge, the authors are the first to investigate the influence of the integration between WCM and board characteristics on Tobin's q ratio.
ISSN:0307-4358
1758-7743
DOI:10.1108/MF-08-2021-0361