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Do Firms Approach the Target Working Capital Requirement? A Case of Pakistan

Indonesian Capital Market Review

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Title Do Firms Approach the Target Working Capital Requirement? A Case of Pakistan
 
Creator Ruqia Shaikh; Zhongnan University of Economics and Law Wuhan
Pervaiz Memon; Sukkur Institute of Business Administration
Muhammad Shaique; Sukkur Institute of Business Administration
Ehsan ul Hassan; University Utara Malaysia
 
Subject —
 
Description The study investigates the dynamism of working capital requirement (WCR) in non-financial firms listed on Pakistan Stock Exchange from the period of 2007 to 2013. The purpose of this research is to analyze whether firms follow the target WCR, to estimate the speed with which firms adjust towards its target WCR and to investigate the firm specific and macroeconomic determinants of WCR. Difference GMM technique is used to analyze the speed and determinants of WCR to avoid the problems of endogeniety and unobservable heterogeneity. The study gives evidence that there is an existence of target WCR in firms of Pakistan and firm require 1.6 years to completely adjust back to target WCR. The factors which are statistically significant in determination of WCR are: the level of economic activity in the country, operating cash flow, profitability, leverage, financial distress, and financing cost. The WCR is measured by net trade cycle of a firm.
 
Publisher Management Research Center, Department of Management, Faculty of Economics and Business, U
 
Contributor —
 
Date 2018-03-21
 
Type —
 
Format application/pdf
 
Identifier http://journal.ui.ac.id/index.php/icmr/article/view/10824
 
Source Indonesian Capital Market Review; Vol 10, No 1 (2018): January 2018
 
Language en