The relationship between working capital management and firm profitability - Evidence from the wholesale and retail trade industry in the Vietnamese stock exchange
Abstract
The study examines the relationship between working capital management and
firm profitability with 360 firm-year observations among Vietnam-based HOSE and
HNX listed companies, notably in Wholesale and Retail Trade industry from 2008 to
2013. The investigation of working capital management is divided into two groups:
working capital components (WCC) and working capital policies (WCP) (the investment
policy and financing policy), which are under the analysis in relation with gross operating
profit (GOP), a proxy for firm profitability. The empirical outcomes indicate that there
are significant associations of used several indicators of WCC with GOP; however,
others do not experience any linkages with GOP while WCP parameters exhibit positive
relationships with GOP. The recommendation for this study is that the management of
inventory and credit period is essentially considerate, along with the coordination of
implementing WCP appropriately. Thereby, based upon the thesis’s regression results
working capital management of every business organization can be expectedly brought
into the new inception of improvement.