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Does Working Capital Management Work?

Hesslin, Alex LU and Efraimsson, Anton LU (2020) BUSN79 20201
Department of Business Administration
Abstract
The purpose of this study is to explore if and how working capital management impacts profitability in Swedish listed non-financial firms. This study is quantitative in nature and therefore naturally employs a deductive and positivistic approach to fulfil its defined purpose. A strongly balanced panel data set is collected using Thomson Reuters Datastream as the main source with the primary statistical method used being an extension of OLS, namely fixed effects. No established theoretical framework exists on working capital management. Instead, capital structure theory is elaborated upon and its implications for working capital management are derived and used to develop hypotheses. The sample consists of 254 Swedish firms listed on the... (More)
The purpose of this study is to explore if and how working capital management impacts profitability in Swedish listed non-financial firms. This study is quantitative in nature and therefore naturally employs a deductive and positivistic approach to fulfil its defined purpose. A strongly balanced panel data set is collected using Thomson Reuters Datastream as the main source with the primary statistical method used being an extension of OLS, namely fixed effects. No established theoretical framework exists on working capital management. Instead, capital structure theory is elaborated upon and its implications for working capital management are derived and used to develop hypotheses. The sample consists of 254 Swedish firms listed on the Stockholm Stock Exchange between 2012 - 2018 resulting in 1,778 observed firm year observations. The cash conversion cycle is found to significantly impact profitability of Swedish, listed, non-financial firms. Additionally, all components of the cash conversion cycle are also found to significantly impact profitability. The findings of our study are largely in line with those of previous research as well as the theoretical background. A significant relationship is established between working capital management and profitability. (Less)
Please use this url to cite or link to this publication:
author
Hesslin, Alex LU and Efraimsson, Anton LU
supervisor
organization
alternative title
The relationship between working capital management and profitability in Swedish firms
course
BUSN79 20201
year
type
H1 - Master's Degree (One Year)
subject
keywords
Working capital management, cash conversion cycle, profitability, pecking order theory, Stockholm Stock Exchange
language
English
id
9027219
date added to LUP
2020-09-08 13:08:23
date last changed
2020-09-08 13:08:23
@misc{9027219,
  abstract     = {{The purpose of this study is to explore if and how working capital management impacts profitability in Swedish listed non-financial firms. This study is quantitative in nature and therefore naturally employs a deductive and positivistic approach to fulfil its defined purpose. A strongly balanced panel data set is collected using Thomson Reuters Datastream as the main source with the primary statistical method used being an extension of OLS, namely fixed effects. No established theoretical framework exists on working capital management. Instead, capital structure theory is elaborated upon and its implications for working capital management are derived and used to develop hypotheses. The sample consists of 254 Swedish firms listed on the Stockholm Stock Exchange between 2012 - 2018 resulting in 1,778 observed firm year observations. The cash conversion cycle is found to significantly impact profitability of Swedish, listed, non-financial firms. Additionally, all components of the cash conversion cycle are also found to significantly impact profitability. The findings of our study are largely in line with those of previous research as well as the theoretical background. A significant relationship is established between working capital management and profitability.}},
  author       = {{Hesslin, Alex and Efraimsson, Anton}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Does Working Capital Management Work?}},
  year         = {{2020}},
}