THE IMPACT OF WORKING CAPITAL MANAGEMENT ON FIRM PROFITABILITYAND FIRM VALUE: EVIDENCE FROM MANUFACTURING SECTOR IN INDONESIA AND THAILAND
Amalina Syaharani (a*), Dony Abdul Chalid (b)
a) Master of Management, Faculty of Economics and Business, University of Indonesia, Jalan Salemba Raya 4, Kota Jakarta Pusat, DKI Jakarta, 10430, Indonesia.
*amalinasyaharani[at]gmail.com
b) Master of Management, Faculty of Economics and Business, University of Indonesia, Jalan Salemba Raya 4, Kota Jakarta Pusat, DKI Jakarta, 10430, Indonesia.
Abstract
The main objective of this research is to provide an analysis of working capital management from selected manufacturing firms in Indonesia and Thailand. The research include an empirical analysis to examine if more efficient working capital management improves firm accounting profitability and firm value. The secondary data was derived from Indonesia Stock Exchange and Thailand Stock Exchange. Database of 218 companies is selected for the ten-year period from 2008-2017. Cash conversion cycle is the measuring tools to calculate the efficiency of working capital management. There are two performance measurement in this study, Tobin-s Q used for examined market valuation and Return On Asset used as represent profitability on manufacturing firms. Leverage, firm size, firm age, growth opportunities and economic conditions are taken as control variables. The study used panel data and regression analysis to test the hypothesis. The results shows that there is a significant negative relationship between working capital management and firms- profitability as well as a significant negative relationship between working capital management and firms- value in Thailand. Meanwhile in Indonesia, working capital management has proven to have no significant relationship with firms- value but has a significant negative relationship with firms- profitability.
Keywords: Working Capital Management, Profitability, Tobins Q, Cash Conversion Cycle
Topic: Management