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Impact of Working Capital Management on Firm Profitability: The Case of Listed Manufacturing Firms on Ho Chi Minh Stock Exchange

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  • Tran Viet Hoang

Abstract

This study is aimed at investigating the relationship between working capital management and profitability. This study is based on a panel data of 98 manufacturing firms listed on Ho Chi Minh City Stock Exchange for a period 6 years (from 2009 to 2014). The results of Pearson’s correlation and fixed effects multiple regression analysis found significant negative relationships between cash conversion cycle, net trade cycle, average collection period, average inventory period, average payment period and return on assets. So managers can improve the firm’s profitability by reducing cash conversion cycle, net trade cycle and it’s components to an optimal level. Further, the control variables including liquidity, leverage, firm size and firm growth also have significant effects on firm profitability. In particular, the findings also imply that managers can use net trade cycle instead of cash conversion cycle confidentially.

Suggested Citation

  • Tran Viet Hoang, 2015. "Impact of Working Capital Management on Firm Profitability: The Case of Listed Manufacturing Firms on Ho Chi Minh Stock Exchange," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(5), pages 779-789.
    • Handle: RePEc:asi:aeafrj:v:5:y:2015:i:5:p:779-789:id:1386
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    Cited by:

    1. Jacek Jaworski & Leszek Czerwonka, 2021. "Meta-study on the relationship between profitability and liquidity of enterprises in macroeconomic and institutional environment," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 48(2), pages 233-246, June.
    2. Samuel Tabot Enow, 2022. "A Meta-Analysis of the Impact of Working Capital on Profitability," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 10(1), pages 1-10.
    3. Akhmadi Akhmadi & Dabela Yunia & Robiyanto Robiyanto, 2020. "The Role of Profitability in the Effect of Company Growth on the Debt Policy," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 267-274, July.
    4. Abdul Basyith & Abid Djazuli & Fitriya Fauzi, 2021. "Does Working Capital Management Affect Profitability? Empirical Evidence from Indonesia Listed Firms," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(3), pages 236-251, March.

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