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Examining the Influence of Corporate Governance on Working Capital Management: Insights from Malaysian Public Listed Companies in Selangor

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  • Nurhazrina Mat Rahim
  • Mohd Fairuz Adnan
  • Yusri Hazrol Yusoff

Abstract

Corporate governance and working capital management (WCM) are treated as essential subjects in financial management. Many researchers have studied the influence of corporate governance, but only a few of them have connected it with WCM efficiency. Particularly in Malaysia, there has been little concentration given to the relationship between corporate governance attributes and the WCM of the companies. Therefore, the present study intends to analyse the impact of corporate governance represented by CEO tenure, CEO Duality, Board size and Audit Committee on WCM represented by the current ratio of 35 Selangor-based companies which are listed under the FTSE Bursa Malaysia Top 100 Index.The results from this study show that CEO tenure has a significant negative impact on the current ratio, while CEO duality has a positive impact on the current ratio. Moreover, board size has no significant impact on the current ratio, and the audit committee has a significant positive impact on the current ratio. These findings imply that effective corporate governance mechanisms can significantly affect WCM. The result is expected to enable the owners of the firms to improve their corporate governance practices to enhance WCM efficiency and, furthermore, contribute to the enhancement of the profitability of the firms and maximise shareholders' wealth indirectly. Additionally, the findings from this study can also be a guide for good corporate governance' criteria that significantly affect the efficiency of WCM to be practised by other companies, including SMEs and other organisations.

Suggested Citation

  • Nurhazrina Mat Rahim & Mohd Fairuz Adnan & Yusri Hazrol Yusoff, 2024. "Examining the Influence of Corporate Governance on Working Capital Management: Insights from Malaysian Public Listed Companies in Selangor," Accounting and Finance Research, Sciedu Press, vol. 13(1), pages 1-30, February.
    • Handle: RePEc:jfr:afr111:v:13:y:2024:i:1:p:30
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    References listed on IDEAS

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    1. Greg Filbeck & Thomas M. Krueger, 2005. "An Analysis of Working Capital Management Results Across Industries," American Journal of Business, Emerald Group Publishing Limited, vol. 20(2), pages 11-20, October.
    2. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
    3. Goyal, Vidhan K. & Park, Chul W., 2002. "Board leadership structure and CEO turnover," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 49-66, January.
    4. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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