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Do financial development and law enforceability effect the relationship between net working capital and firm value? Empirical evidence from Asia

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  • Nufazil Altaf

Abstract

Purpose - The purpose of this paper is to examine the relationship between net working capital and firm value for a sample of 2,483 firms across 16 Asian countries. In addition, this study also examines the impact of degree of financial development and law enforceability on net working capital-firm value relationship. Design/methodology/approach - The study is based on secondary financial data of 2,483 Asian firms obtained from Bloomberg database, pertaining to a period of five years. This study employs the fixed effects approach to arrive at results. Findings - Results of the study confirm a strong negative relationship between net working capital and firm value. In addition, the author also found that the negative relationship between net working capital and firm value to be strong for countries that have a high degree of financial development and law enforceability. Originality/value - Unlike prior studies, this study examines the relationship between net working capital and firm value. In addition, this study also tests the impact of degree of financial development and law enforceability on this relationship. To the best knowledge, no such study has been conducted in the Asian context.

Suggested Citation

  • Nufazil Altaf, 2018. "Do financial development and law enforceability effect the relationship between net working capital and firm value? Empirical evidence from Asia," American Journal of Business, Emerald Group Publishing Limited, vol. 33(3), pages 120-132, August.
    • Handle: RePEc:eme:ajbpps:ajb-11-2017-0034
    DOI: 10.1108/AJB-11-2017-0034
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    Cited by:

    1. Martha Coleman & Mengyun Wu, 2020. "Combination of Ant Colony Optimization and K-nearest Neighbours: The Influence of Working Capital Management on Corporate Performance," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 45(4), pages 395-415, November.

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