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The Influence of Working Capital on Profitability: Evidence of Listed Companies in Thailand Market for Alternative Investment (MAI)

Author

Listed:
  • Apichat Pongsupatt

    (Department of Finance, Faculty of Business Administration, Kasetsart University)

  • Tharinee Pongsupatt

    (Department of Accounting, Faculty of Business Administration, Kasetsart University)

Abstract

The objective of this study is to investigate the relationship between working capital management and profitability on the Market for Alternative Investment (MAI) in Thailand?s capital market. The general objective of MAI is compatible to the Stock Exchange of Thailand (SET) which is to act as a capital market for various businesses, but this market is focus on small and medium-sized enterprises (SMEs) and innovation. From existing literature reviews, we select five factors including receivables collection period, inventory conversion period, payable deferral period, cash conversion cycle and current ratio as explanatory variables. At the time, firm size and debt ratio are assigned as controllable variables. While return on invested capital (ROIC), a dependent variable is employed as proxy for profitability. This study uses secondary data collected from annual financial statements of companies in MAI index for the period of 10 years from 2014-2023. After examining the data, only 826 samples are qualified under the criteria. The multiple regression model is implemented for statistical testing at the significant level 0.05. The results indicate a negative significant relationship between the receivable collection period and payable deferral period with profitability. This model is supported with R2 of 0.144. We also observe that all types of MAI firms can increase their profitability by shortening the receivable collection period and curtailing the payable deferral period. The findings in this study can assist investors or managers to comprehend the effect of specific determinants to the SME?s profitability in Thailand.

Suggested Citation

  • Apichat Pongsupatt & Tharinee Pongsupatt, 0000. "The Influence of Working Capital on Profitability: Evidence of Listed Companies in Thailand Market for Alternative Investment (MAI)," Proceedings of Economics and Finance Conferences 14716372, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:14716372
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    References listed on IDEAS

    as
    1. Robert Kieschnick & Mark Laplante & Rabih Moussawi, 2013. "Working Capital Management and Shareholders' Wealth," Review of Finance, European Finance Association, vol. 17(5), pages 1827-1852.
    2. Enqvist, Julius & Graham, Michael & Nikkinen, Jussi, 2014. "The impact of working capital management on firm profitability in different business cycles: Evidence from Finland," Research in International Business and Finance, Elsevier, vol. 32(C), pages 36-49.
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    More about this item

    Keywords

    Working Capital Management; Cash Conversion Cycle; Receivable Collection Period; Inventory Conversion Period; Payable Deferral Period; Return on Invested Capital; Thailand MAI Index;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Y10 - Miscellaneous Categories - - Data: Tables and Charts - - - Data: Tables and Charts

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