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Determinants of Working Capital Investment in South Africa: Evidence from Selected JSE-Listed Firms

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  • Farai Kwenda

Abstract

This paper analyses the determinants of working capital investments of 92 companies listed on the Johannesburg Stock Exchange (JSE) over the period 2001-2010. Working capital management has grown in significance from being a survival issue to a strategic and competitive tool. Using the Generalized Method of Moments estimation, the study found that firms pursue target levels of current assets. However, the adjustment process is relatively slow. The study found that leverage, short-term finance and fixed investment significantly influence the level of working capital investment, while operating cash flows, state of the economy, firm size and sales growth rate were found to be statistically insignificantly related to working capital investment. The study recommends that managers understand the driving factors of working capital investment since working capital investment influences the value of the firm.

Suggested Citation

  • Farai Kwenda, 2014. "Determinants of Working Capital Investment in South Africa: Evidence from Selected JSE-Listed Firms," Journal of Economics and Behavioral Studies, AMH International, vol. 6(7), pages 569-580.
    • Handle: RePEc:rnd:arjebs:v:6:y:2014:i:7:p:569-580
    DOI: 10.22610/jebs.v6i7.518
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    References listed on IDEAS

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    Cited by:

    1. Dina Korent, 2021. "Target adjustment model and new working capital management performance measure: Evidence from Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 39(1), pages 135-162.
    2. Zenzele Mzimela & Mabutho Sibanda & Bomi Nomlala & Hlengiwe Ndlela, 2022. "Evidence from South African Construction and Industrial Transportation Businesses on Asset Revaluation," Eurasian Journal of Business and Management, Eurasian Publications, vol. 10(4), pages 239-251.
    3. Dina Korent Silvije Orsag, 2018. "Organisational Decision-Making and Academic Institutions: Increasing Complexity of Processes, Settings and Actors," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 21(1), pages 47-65, May.

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