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Source publication
Objective of this study is to reveal the impact of the recent global economic crisis, triggered in 2007 and unveiled in 2008, on the working capital of real sector in Turkey. Since it is obvious that ratios would help in such an analysis, we analyzed the current assets and liabilities related ratios, based on financial statements of Turkish real se...
Contexts in source publication
Context 1
... our analysis it will be proper to discuss the crisis prevailing conditions of Turkish economy. Mentioned indicators are given in Table 1. As can be seen in the table, yearly inflation rate increased from 8.39% in the 4th quarter of 2007 to 11.13% in the 3rd quarter 2008. ...
Context 2
... we compare the economic indicators presented in Table 1 with our empirical findings, it would not be wrong to argue that GEC did not affect the working capital of Turkish firms, due to the short term maturity characteristics of the economic crisis and the drop in the interest rates. When there were huge cash outflows during the economic crises in 1994 and 2001, interest rates and inflation both increased considerably. ...
Citations
... The financial system in Kenya is organized according to conventional lines. Managing working capital is a core activity which is also a daily process that requires bank managers to monitor and project cash-flows (Kesimli & Gunay, 2011). Sathamoorthi (2002) asserts that; an increase in current asset to total asset leads to a negative effect on profitability, while an increase in current liabilities to total liabilities gives a positive effect on profitability. ...
An effective and efficient net working capital majorly contribute to commercial banks success as it forms part of a company's short-term financing strategy. Efficiency of working capital is based on the principle of speeding up collections as quickly as possible and slowing down disbursements as slowly as possible. An effective working capital management system helps banks not only cover their financial obligations but also boost their earnings. The study sought to examine the effects of working capital which comprised of aspects current assets and current liabilities. This study is guided by two theories, namely; Free Cash Flow Hypothesis and the Agency theory. The study adopted the descriptive and explanatory research designs. The population of the current study comprised of all commercial banks thus a census survey method was adopted. This study relied on secondary data which was obtained from annual reports issued by the CBK Bank. The results of the study showed that there was positive linear relationship between net working capital and the dependent variable (corporate cash holding) and the model was statistically significant. The study used ANOVA to establish the significance of the regression model from which an f-significance value of p less than 0.05 was established. The findings of the analysis revealed that when the independent variables had a significant combined effect (R 2 = 0.428) on corporate cash holding in the commercial banks in Kenya and could be used to predict future profitability. The study concludes that Net working capital has a significant relationship with cash held by commercial banks while Changes in banks characteristics over time are primarily responsible for the increase in cash holdings and therefore net working capital of firms drastically decreases and cash flows become riskier. It was recommended that the financial managers should focus on reducing the cash conversion cycle by investing more in net working capital.
... Inefficient management of working capital has been cited as a major cause of businesses failures (Altman, 1968;Dunn & Cheatham, 1993;Shin & Soenen,1998). Competency in managing working capital helps firms not only to withstand the impact of economic turbulence but also plays a crucial role during booming economic seasons (Kesimli & Gunay, 2011;Reason, 2008). Accordingly, Padachi & Howorth (2014), explained that maintaining stable growth, avoiding financial distress and sustaining solvency, are crucial for firm's long-term survival. ...
Limited research interest in studying working capital management process, is found in the literature. However, working capital management has been the most crucial determinant factor for any industry’s survival, liquidity, solvency and profitability. Therefore, to tackle efficiently liquidity and profitability trade –off, all industries are compelled to improvise their working capital management strategies. Continuation of working capital management process at optimal level, expedites firm's value creation and also facilitates to design framework in smoothening financial constraints so as to make effective usages of firm’s resources. The paper argues that automotive industry occupies a significant proportion of global economy. Therefore, an effort has been made to undertake an in-depth study on the industry. The study besides identifying the industry leader, explores diverse techniques to advance comparative study on the industry efficiency level in managing working capital process. The research outcome facilitates investors to choose the most commendable automotive companies for investments.
... A study conducted by KPMG (2010) showed that firms globally began shifting more attention on liquid funds and WCM to save the situation during the recession era. Indeed, firms with effective WCM practices experience better working conditions than those that fail to take advantage of these practices (Kesimli and Gunay, 2011). ...
Purpose
The concept of working capital management (WCM) has been a fundamental financial accounting term that has evolved in financial theory for centuries. Given that the construction industry (CI) is financially dynamic, there is an imperative need to understand its WCM practices. The call for the industry players to adhere to efficient financial management practices as a result of a huge financing gap requires consented effort. This study aims to explore the trend of practices of WCM in the CI and elicit a broader polemic dialogue about this crucial theme.
Design/methodology/approach
The source of information for the study was secondary mainly from referenced journals and international conference papers published on WCM relating to the CI. A three-step sample selection strategy was adopted to identify the range and scope of publications on WCM in the CI based on the systematic literature review method.
Findings
The CI cannot boost of enough empirical WCM research to gain in-depth understanding of its practical trend. The developing economies are failing to produce insightful peer-reviewed papers on WCM to assist in bridging the infrastructural financing gap through apposite strategies. Gaining appropriate knowledge of the short-term financial operations through a conceptualization of WCM practices in the CI may lead to better strategies formulated for smooth operations.
Originality/value
This is a pioneering paper in developing economies that have taken stock of WCM knowledge of the practical trend in the CI. Future research prospects in which WCM matters can use it as a reference point.
... Liquidity denotes investment in current assets and current liabilities which are honored within one year or less and which is therefore vital for a firm's day to day operations (Kesimli & Günay, 2011). Since liquidity influences performance via its effect on financial cost reduction or growth, changes in the sales dynamic, as well as its influences on company's risk level, it is included as an independent variable in this study and is measured using the current ratio which is calculated by dividing total current assets by total current liabilities. ...
This paper assesses the causal relationship between corporate social responsibility (CSR) activities and corporate financial performance using a sample of 43 hotels for the period 2007–2018. The research employs a dynamic panel vector autoregressive model (PVAR) which brings more analytical insights in the CSR- Financial Performance modeling. The results show that CSR has a positive and significant impact on corporate financial performance and lend support to the theoretical underpinnings with respect to the CSR and financial performance nexus. The results suggest that growth opportunities mediate the relationship between CSR and performance. High-growth hotels will have better opportunities to engage in CSR activities which in turn positively impact on their performance. Practically, our findings suggest that CSR is an important mechanism to improve the efficiency of organizations.
... Efficient and effective WCM allows businesses to make strategic investments that drive operational efficiencies and help mitigate certain risks during economic uncertainty. Despite the importance of WCM in addressing liquidity shortfall during the economic crisis, it is surprising that only a few studies have investigated WCM practices during the financial crisis (Ramiah et al., 2014;Haron and Nomran, 2016;VU and Phan, 2016;Kesimli and Gunay, 2011;Simon et al., 2018;Gonçalves et al., 2018). Ramiah et al. (2014) examined WCM during the financial crisis of 2008, drawing insights from Australia's experience. ...
... Similar to Vu and Phan (2016), Kesimli and Gunay (2011) examined the impact of the global financial crisis on the working capital of the real sector in Turkey. They reported that the receivables turnover ratio was one of the most affected ratios amongst others. ...
Purpose
This study aims to explore changes in working capital management (WCM) practices in response to economic downturns, especially during the coronavirus pandemic.
Design/methodology/approach
This study adopts an interpretative approach. This paper used semi-structured interviews with 2 finance directors and 13 top managers for data collection. This paper used thematic analysis for analysing the interview data.
Findings
The study findings suggest that the traditional ways of managing working capital may no longer be sufficient during a crisis. Instead, dynamic financing, trade credit policy and continuous staff training to develop new skills are alternative WCM practices to navigate the challenges of a crisis. Further, this paper finds that economic conditions, such as inflation rates, interest rates, exchange rates and government policy, negatively affect WCM.
Practical implications
The study findings highlight practical issues that may help firms meet their present and future financing needs, manage their day-to-day operational activities and enhance performance, both operational and financial. The study is beneficial for regulators in understanding a firm’s constraints during crises and respond appropriately.
Originality/value
This is the first study, to the best of the knowledge that uses a qualitative approach to investigate the impact of economic downturns on WCM practices of firms. Thus, this study offers new insights into the fundamentals of WCM practices during crises.
... They came up with the conclusion that during the crisis period, most of the firms focused on shortening the CCC, while capital expenditures and inventory levels were curtailed to preserve cash, and firms become more risk-averse with tight credit controls. Likewise, Gunay and Kesimli (2011) examined the influence of GFC on the working capital of Turkish real sector firms. Their results revealed that the receivable turnover ratio was badly affected by GFC as it was 15.18 times for the precrisis era and dropped to merely 5.04 times during the crisis period. ...
This research investigates the impact of working capital management (WCM) on the profitability and market performance of firms that constitute an Islamic market index (Karachi Meezan Index [KMI-30]) in Pakistan during 2002–2013. The data have been divided into three parts, that is, preglobal (2002–2007), during (2007–2008), and postglobal financial crisis period (2008–2013), to examine the proposed relationship in different macroeconomic settings. Net trade cycle (NTC) and its components are used to measure the WCM efficiency, while NTC square is used to proxy the impact of excessive holdings of working capital on corporate performance. The econometric models are calculated in a generalized method of moments (GMMs)-based regression environment to ensure the robustness of empirical outcome. The results reveal that, as opposed to conventional businesses, KMI-30 firms are more ethical in their short-term financial management. Besides, such firms adopted a conservative WCM policy during the global financial crisis of 2007–2008. Furthermore, we confirm the presence of a concave relationship between working capital levels and firm performance as NTC is positively, whereas NTC square is negatively, related to firm performance. This article makes a significant contribution to the extant literature as it evaluates the impact of WCM on the profitability and market performance of Islamic market indexed firms under varying macroeconomic conditions.
... Corporate finance deals with three decisions like capital budgeting, capital structure and Working Capital Management (WCM). WCM is the investment in current assets and current liabilities that liquidate in a year or less and is very crucial for a firm's day-to-day operations (Kesimli and Gunay, 2011). Among these, WCM is a very important component of corporate finance since it affects the liquidity and profitability of a company. ...
Efficient management of working capital ensures a company has sufficient cash flow to meet its short-term debt obligations and operating expenses. The study analysis WCM and corporate profitability of listed manufacturing companies of the CSE in Sri Lanka. A sample of twenty-two listed manufacturing companies selected randomly for the purpose of this study. Data collected from annual reports of the sampled firms for the period 2009-2015. The working capital was determined by the cash conversion cycle and the profitability was measured by return on assets. The study applied panel data models (random effects). The data were analyzed by means of descriptive statistics and GLS random regression analysis using STATA 12. The study finds that there is a significant negative impact of inventory turnover on corporate profitability while debtors turnover insignificant positive affect corporate profitability. In addition, creditors' turnover has significant positive impact on corporate profitability. The results conclude that WCM impact of profitability of listed manufacturing companies in Sri Lanka
... On the other hand, the firm's investment in short-term assets like account receivable, account payable, inventory and others including cash or cash equivalent and marketable security is called working capital. Kesimli & Gunay(2011) also stated that it is the investment in current assets and current liabilities which are liquidated in a year or less and is very crucial for a firm's day-to-day operations. ...
The objective of this study was to analyze the relationships of the existing practices with the profitability of the
companies. Data were collected from secondary sources and primary sources. An Econometric tool, i.e., Order
probit regression technique was applied to assist the researcher verifying the relationship between the practices
and the profitability of the companies. Moreover, the study has analyzed the consequences of existing financial
management practices on profitability and found that there was direct relationship between profitability and
financial reporting and analysis; and the accounting information system. On the other hand, profitability was
inversely related with age of the company, capital budgeting and capital structure management practices. The
companies should exercise to maintain suitable ratio between debt and total capital; use effective financial
leverage and should review the debt level in order to use it for making finance decisions. Moreover, the
companies should evaluate their future projects and fixed assets after acquisition using different capital
budgeting techniques rather than a simple determination of accounting profit. The variables used in the study
were not exhaustive. Thus, future research may incorporate other financial management practices such as
budgeting and CVP analysis and the potential researchers may also assess the practices in different sectors.
Keywords: Accounting Information System, Capital Budgeting, Capital Structure, Financial Management
Practices, Financial Management, Financial Reporting and Analysis, Profitability, Working Capital
... On the other hand, the firm's investment in short-term assets like account receivable, account payable, inventory and others including cash or cash equivalent and marketable security is called working capital. Kesimli & Gunay(2011) also stated that it is the investment in current assets and current liabilities which are liquidated in a year or less and is very crucial for a firm's day-to-day operations. ...
The objective of this study was to evaluate whether financial management was applicable in the selected organizations or not. Data were collected from primary sources. The analytical tool was used to analyze the data by describing the basic features of the data in the study, and to provide summaries of the variables and measures. Most of the manufacturing companies have applied financial reporting and analysis management; working capital management; and accounting information system management practices. Even if there was an existing accounting information management practices, there was a difference among the companies in using different package of software to fasten and incorporate all activities in one system. On the other hand, the companies did not apply financial management practices related to the capital structure and capital budgeting management practices. The companies should exercise to maintain suitable ratio between debt and total capital; use effective financial leverage and should review the debt level in order to use it for making finance decisions. Moreover, the companies should evaluate their future projects and fixed assets after acquisition using different capital budgeting techniques rather than a simple determination of accounting profit. The variables used in the study were not exhaustive. Thus, future research may incorporate other financial management practices such as budgeting and CVP analysis and the potential researchers may also assess the practices in different sectors.
... Scholleova (2012) analyzed the role of WCM during 2008 GFC and reported that active management survived during the 2008 GFC by optimizing the assets. These firms paid a strong focus on production, sales and financing of WC. Gunay and Kesimli (2011) reported that firms have been negatively affected to some extent by the 2008 GFC. Baveld (2012) investigated the WCM of the public listed firms of The Netherlands before (2004)(2005)(2006) and during (2007)(2008)(2009)) the 2008 GFC period and reported that firms with the aim to increase profits during crisis period did not change their WC policies and followed aggressive WC policy. ...
Purpose
This paper aims to provide a review of the existing literature available on working capital (WC) and working capital management (WCM).
Design/methodology/approach
A systematic literature review (SLR) methodology is used to review 187 articles selected from referred journals, books and international conferences for the period 1980-2017.
Findings
This comprehensive review reveals that much of the focus in the existing literature is paid on investigating the empirical relationship between WCM and firm performance. Furthermore, the attention has been paid towards studying the WC practices. The behavioural aspects, qualitative studies, survey studies and systematic theory development have been ignored in most of the prior studies. These areas have a broader scope for future research.
Research limitations/implications
This study is based on literature review and theoretical in nature. Therefore, it does not have any empirical results.
Practical implications
So far, a limited literature review studies have been conducted in WCM perspective. This review provides various emerging trends, which may be considered in future research for providing a deep understanding of WCM.
Originality/value
This is the first time a detailed review of WCM literature has been conducted by using SLR for the period of 1980-2017. This review will be useful for researchers, business policymaker, finance professionals and all other having direct or indirect concerns with WCM study.
