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Does Working Capital Affect Family Firms’ Decision-Making in Laos? Evidence from a Two-Wave Cross-Lagged Approach

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  • Hanvedes Daovisan

    (Center for Research on Plurality in the Mekong Region, Faculty of Humanities and Social Sciences, Khon Kaen University, Khon Kaen 40002, Thailand)

  • H. L. Shen

    (College of Management, National Taiwan University, Roosevelt Rd., Taipei City 106, Taiwan)

Abstract

Family firms are the backbone of the socialist transition to a market-oriented economy in Laos. Working capital is an important area of finance that has not been widely studied in relation to family firms’ decision-making. We hypothesize that working capital has a positive cross-lagged effect on decision-making. The hypotheses were tested on a sample of 779 Laotian family firms from 2016 to 2017 ( t 1 ) and from 2018 to 2019 ( t 2 ) . The analysis was performed using a two-wave cross-lagged model under structural equation modelling. Our results confirm that working capital (access to finance, cash, debt financing, inventory, growth, and profitability) has a positive cross-lagged effect on decision-making. In addition, the findings also suggest that family firms’ early-debt financing could have a vital influence on decision-making. The practical implications of the results are discussed.

Suggested Citation

  • Hanvedes Daovisan & H. L. Shen, 2020. "Does Working Capital Affect Family Firms’ Decision-Making in Laos? Evidence from a Two-Wave Cross-Lagged Approach," Sustainability, MDPI, vol. 12(7), pages 1-16, March.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:7:p:2658-:d:337902
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    1. Hanvedes Daovisan & Thanapauge Chamaratana, 2020. "Resistance to change in the financial management of small family-owned firms: a grounded theory of family firms in Laos," Journal of Accounting & Organizational Change, Emerald Group Publishing Limited, vol. 16(3), pages 497-514, August.

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