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Effects of working capital management on the profitability of South African construction companies listed on the JSE

Author

Listed:
  • Letshaba Sejake

    (Vaal University of Technology)

  • John Beneke

    (Vaal University of Technology)

  • Johannes G Maseko

    (Vaal University of Technology)

  • Bouba Ismaila

    (Vaal University of Technology)

Abstract

This study examines the correlation between inventory and accounts payable management and the profitability of construction companies listed on the Johannesburg Stock Exchange (JSE). The annual financial statements of all 13 listed construction businesses from 2009 to 2019, including statements of financial position and financial performance, were obtained from an external database for statistical analysis. The study employed multiple linear regression to assess the impact of working capital management on the financial performance of construction companies listed on the JSE. Additionally, a correlation model was utilised to investigate any potential relationships among the variables being examined. The study's findings indicate that the management of working capital has a notable impact on the profitability of construction companies listed on the Johannesburg Stock Exchange (JSE) in South Africa. Despite contradicting findings from other studies that support the opposite conclusion, this study demonstrates that effective management of working capital does not necessarily lead to a positive relationship with financial performance for financial managers of construction companies. Therefore, it is crucial to consider other aspects of management in addition to working capital. Key Words:Accounts Payable Management, Construction Companies, Financial Performance, Inventory Management, Johannesburg Stock Exchange, Profitability

Suggested Citation

  • Letshaba Sejake & John Beneke & Johannes G Maseko & Bouba Ismaila, 2024. "Effects of working capital management on the profitability of South African construction companies listed on the JSE," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 13(4), pages 252-264, June.
    • Handle: RePEc:rbs:ijbrss:v:13:y:2024:i:4:p:252-264
    DOI: 10.20525/ijrbs.v13i4.3341
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    References listed on IDEAS

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    1. Lorena Škufliæ & Danijel Mlinariæ & Marko Družiæ, 2018. "Determinants of construction sector profitability in Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(1), pages 337-354.
    2. Pablo Ballesteros-Pérez & Stefán Thor Smith & Josephine Gwen Lloyd-Papworth & Peter Cooke, 2018. "Incorporating the effect of weather in construction scheduling and management with sine wave curves: application in the United Kingdom," Construction Management and Economics, Taylor & Francis Journals, vol. 36(12), pages 666-682, December.
    3. Le Toan & Ho Van Nhan & Le Nguyen Ngoc Anh & Le Quang Man, 2017. "The Relationship between Working Capital Management and Profitability: Evidence in Viet Nam," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(8), pages 175-175, July.
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