TITLE

Efficiency of Working Capital Management and Corporate Profitability

AUTHOR(S)
Hyun-Han Shin; Soenen, Luc
PUB. DATE
September 1998
SOURCE
Financial Practice & Education;Fall/Winter98, Vol. 8 Issue 2, p37
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Efficient working capital management is an integral part of the overall corporate strategy to create shareholder value. We investigate the relation between the firm's net-trade cycle and its profitability. This relationship is examined using correlation and regression analysis, by industry and working capital intensity. Using a Compustat sample of 58,985 firm years covering the period 1975-1994, we find, in all cases, a strong negative relation between the length of the firm's net-trade cycle and its profitability. In addition, shorter net-trade cycles are associated with higher risk-adjusted stock returns.
ACCESSION #
1712459

 

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