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On the role of institutional factors in shaping working capital management policies: Empirical evidence from European listed firms

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  • Anton, Sorin Gabriel
  • Nucu, Anca Elena Afloarei

Abstract

The study examines the impact of institutional factors on working capital management for a sample of 5431 European listed firms over the period 2010–2018. Employing a weighted least squares (WLS) methodology, we provide empirical evidence on the role of institutional quality in shaping the working capital policies of European listed firms. The results indicate that firms located in countries with a stronger institutional framework maintain lower levels of working capital on average. The results are robust to different subsamples of firms. The study complements the extant literature by analyzing the effects of institutional quality on working capital management, across a large number of different institutional systems specific to developed and transition economies alike. The results are useful for practitioners and policy makers in understanding the relationship between institutional quality and short-term firm-level decisions.

Suggested Citation

  • Anton, Sorin Gabriel & Nucu, Anca Elena Afloarei, 2022. "On the role of institutional factors in shaping working capital management policies: Empirical evidence from European listed firms," Economic Systems, Elsevier, vol. 46(2).
    • Handle: RePEc:eee:ecosys:v:46:y:2022:i:2:s0939362522000383
    DOI: 10.1016/j.ecosys.2022.100976
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    More about this item

    Keywords

    European Union; Institutional quality; Listed firms; Working capital;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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