Determinants of working capital management: Case of Singapore firms

Abstract

It is undeniable that firms cannot survive and continue their daily operations without sufficient level of the working capital. The crucial part of working capital is the management of working capital since it affects both liquidity and profitability of the firms. Determining the important factors affecting working capital management would able managers to manage working capital efficiently and effectively. Therefore, managers should be aware about important factors that affect working capital management. Using panel data analysis including Pooled OLS, random effects and fixed effects estimations, we revealed that firm size, operation cash flow, capital expenditures, and gross domestic products negatively are correlated to the working capital management. Moreover, we found that firms with more profitability have longer cash conversion cycle. Finally, we did not find any significant relationship between cash conversion cycle and debt ratio.

Keywords: working capital management, cash conversion cycle, panel data analysis