The impact of capital expenditure on working capital management in food and beverage companies in Ho Chi Minh

Abstract

It can’t be denied the fact that working capital management plays the significant role in survival and ability of firm daily operations. To maintain the firm performance, managers should adapt sufficient level of the working capital and eliminate factors that can cause financial exposure. Analyzing the potential factors affecting working capital management would provide strategies to manage working capital efficiently and effectively. In order to obtain the working capital strategies, managers should be aware about expenditures that affect working capital management. This research investigated based on Shulman and Cox’s study (1985) that develop working capital measurement through two proxies: Net Liquidity Balance and Working Capital Requirement. There are some empirical studies have been elaborated in some countries and there are some results concluded that capital expenditure has impact on working capital but it might not be able to be applied to give the same findings when conducting in different countries. Therefore, the purpose of this research is to investigate and test whether it is possible to obtain the relationship and impact of capital expenditure on working capital management in Viet Nam market, especially this study will focus on Food and Beverage industry listed in Ho Chi Minh Stock Exchange (HOSE). For testing the research hypotheses, financial statement data of 34 companies has been approached and for analyzing and testing hypotheses, panel regression method is used. As a result, the study found out that there is no significant relationship between capital expenditure and working capital requirement but there is a negative significant relationship between capital expenditure and net liquidity balance. It is concluded that there is the impact ofx capital expenditure on working capital management after conducting three hypothesis.