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.