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Working Capital Management and Firms¡¯ Profitability: Evidence from Vietnam¡¯s Stock Exchange

Author

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  • Huy-Cuong Nguyen
  • Manh-Dung Tran
  • Duc-Trung Nguyen

Abstract

The paper investigates what effect Working Capital Management has on firms¡¯ profitability by using the data from listed companies on Vietnamese Stock Exchange. The sample is collected from 127 public companies for the period of 9 years from 2006 to 2014. The research uses four variables to represent Working Capital Management, which are Day of Sales Outstanding (DSO), Day Sales of Inventories (DSI), Day of Payables Outstanding (DPO), and Cash Conversion Cycle (CCC). Moreover, in order to robust the result, the study also takes into the account the following variables: ¡°Leverage, Growth, Tangibility, Size, Industrial Factors, and Macroeconomic Effects¡±, which were proven to have significant effects on firms¡¯ profitability. The result implies that there is no correlation between Working Capital Management and firms¡¯ profitability. Hence the conclusion is that Working Capital Management can help companies solve the short-term obligations and improve the efficiency by improving the supply chain and credit policies, however it has nothing to do with firms¡¯ profitability of the companies in the sample.

Suggested Citation

  • Huy-Cuong Nguyen & Manh-Dung Tran & Duc-Trung Nguyen, 2016. "Working Capital Management and Firms¡¯ Profitability: Evidence from Vietnam¡¯s Stock Exchange," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 55-62, May.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:5:p:55-62
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    Cited by:

    1. Hoang-Lan Le & Kieu-Trang Vu & Thi-Bich-Ngoc Le & Ngoc-Khanh Du & Manh Dung Tran, 2018. "Impact of Working Capital Management on Financial Performance: The case of Vietnam," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 3(1), pages 15-20.

    More about this item

    Keywords

    working capital management; firms¡¯ profitability; macroeconomic effects; industrial factors;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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