THE MODERATING ROLE OF CORPORATE GOVERNANCE ON WORKING CAPITAL MANAGEMENT AND FIRMS PERFORMANCE

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Published: 2016-09-08

Page: 182-194


RIZWAN AHMAD

National College of Business Administration and Economics (NCBA&E), Pakistan.

FAISAL JAVAID *

University of Gujrat, Sialkot Sub Campus, Pakistan.

*Author to whom correspondence should be addressed.


Abstract

The prime objective of this research is to find the moderating effect of Corporate Governance on the relationship between Financial Performance in terms of NPM, ROE, and ROA and working capital management of manufacturing firms listed in Karachi Stock Exchange (KSE) in Pakistan.

This study analyzed the effects of working capital management on Firm’s profitability in Pakistan for the period 2009 to 2014. To achieve this objective, balanced Panel data of 192 manufacturing companies listed in Karachi Stock Exchange is used.

The findings suggest that the working capital management has insignificant relationship with the profitability of the manufacturing sector companies. Specifically the manufacturing companies of Pakistan are struggling with their collection and payment habits. Further, the firm size and sales growth have significant impact on the performance of the companies. The study also suggest that manufacturing firms in Pakistan are following conservative working capital financing policy which means they finance their major working capital with long term sources which is also a cause of reduced profitability. The firms are required to focus on their collection and payment strategy. And need to improve them. The efficient systems and procedures should be constructed for the separate component of working capital. Further, efficient management and financing of working capital will improve the performance of companies. For effective working capital management, competent staff in the subject of management and economics and finance must be recruited by the firms for expert view on working capital management in the manufacturing sector.

Keywords: Working capital management, cash conversion cycle, corporate governance index


How to Cite

AHMAD, R., & JAVAID, F. (2016). THE MODERATING ROLE OF CORPORATE GOVERNANCE ON WORKING CAPITAL MANAGEMENT AND FIRMS PERFORMANCE. Journal of Global Economics, Management and Business Research, 7(3), 182–194. Retrieved from https://ikprress.org/index.php/JGEMBR/article/view/3065

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