Working Capital Management behavior: The study from companies listed on Ho Chi Minh stock exchange (HOSE)
Abstract
Over years there are many researches about the impact of working capital
management on firm’s profitability. Nonetheless, the factors that determine working
capital requirement of company have not been investigated extensively. Consequently,
the study is carried out to examine the determinants influencing the need of working
capital of 271 companies listed on Ho Chi Minh stock exchange (Hose) using panel data
for the period from 2009 to 2014.
For the purpose of this study, the quantitative method is used to test a set of
research hypothesis. The empirical results reveal that most industries exposed in the
study have run their business with the conservative working capital policy in accordance
with high demand of working capital. The company size, profitability and operating cycle
have positive and significant impact on working capital requirement of Vietnamese
companies. Besides, it is also shown that the more financial leverage company employs
the less working capital it requires. Sale growth factor appears to have no significant
impact on working capital requirement. The moderate effect of such decisive factors as
size, profitability, operating cycle and leverage illustrates the context of working capital
need in a transitional economy as Vietnam. The study’s findings offer the basic reference
for future research as well as the implication for managers in operating business.