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International Journal of Academic Research in Accounting, Finance and Management Sciences

Open Access Journal

ISSN: 2225-8329

Analysing the Effect of Company Characteristics on Working Capital Management: Evidence from an Emerging Economy

Charles Ekornunye Ansah

http://dx.doi.org/10.6007/IJARAFMS/v11-i3/11239

Open access

This study analyses effects of company characteristics (company size (SIZE), profitability, operating cash flow, sales growth, current ratio (CR), quick ratio (QR) and debt ratio (DR)) on Working Capital Management (WCM), measured as cash conversion cycle (CCC). Unlike profitability, these characteristics have received less attention in the extant literature especially in emerging economies and this is where the study makes its contribution. Data retrieved were gathered from annual financial reports of 13 sampled non-financial firms, over the period 2005 – 2013, listed on Ghana Stock Exchange. Panel data methodology was used, and descriptive statistics, regression and correlation analyses were employed in testing the seven hypotheses. Results indicate that, SIZE has a negative and significant impact on CCC whereas CR and DR positively and significantly relate to CCC. The findings imply that: CCC is greatly enhanced if managers improve upon their firms’ sizes; further, firms can enhance their CCC by maintaining CR and DR at optimal levels so that more profits could be accumulated, resulting from the efficiency, to support positive NPV projects. The study however finds no relationship between CCC and the other variables. Further researches could consider measuring WCM using cash conversion efficiency, net working capital level and operating cycle.

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In-Text Citation: (Ansah, 2021)
To Cite this Article: Ansah, C. E. (2021). Analysing the Effect of Company Characteristics on Working Capital Management: Evidence from an Emerging Economy. International Journal of Academic Research in Accounting Finance and Management Sciences, 11(3), 554–585.