A Study On The Effect Of Corporate Governance On Dynamic Adjustment Of Working Capital

Working capital is the blood of enterprise business activities,providing energy and nutrients for business operational activities.With the continuous development of economic and social as well as economic transformation and upgrading of the structure,the enterprise faces increasingly fierce competition in the market.As business environment changes,the resulting business pressure makes the importance of working capital in the enterprise growing,.Taking Smith(1980)as example,the working capital in terms of the enterprise profits,risks and value plays a significant role.In November 2016 China Huarong is expected to issue commercial notes totaled $2.98 billion used for working capital.In July 2015,Country Garden had planed to issue 6 billion yuan in bonds for working capital and debt offerings.Reuters reported in June 2012,according to a report released by Ernst&Young,in Europe and the large enterprises have accumulated up to$1.2 trillion in cash on the balance sheet.Not only such,Ernst&Young in its annual survey also found that the working capital management,and worried about the emergence of a new credit crunch or economic downturn,2000 in Europe and the large company reserves a large number of working capital,the amount equivalent to nearly 7%of the sales,working capital this alone makes the enterprise may lose the debt reduction,giving back to the investors or speed up the enterprise profit growth opportunities.The importance of working capital is self-evident,the traditional research on working capital more than the level of working capital in the view of static hold,configuration,status and thus carries on the present situation description,obviously this sort of research lacking of working capital to the interpretation of the dynamic change process.Pay attention to individual assets management while ignoring global capital changes and attach importance to the governance mechanism of financial business innovation while money management neglected.In the perspective of dynamic working capital,therefore,makes the enterprise to the adjustment of the working capital can adapt to the increasingly fierce competition is imminent.Accurate and efficient working capital adjustment prevents enterprise capital chain from clashing and ensures the smooth operation of the business activities played a vital role.And working capital as a product of the enterprise internal and external factors coordinates coexistence,not only affected by external suppliers and customers,will also be affected by the internal corporate governance mechanism,the adjustment behavior under different corporate governance environment can present a different state of dynamic adjustment.Corporate governance is essentially a kind of checks and balances mechanism to solve the problem of various agents.It guarantees the enterprise production and management decision-making is accurate.Corporate governance has formed a set of various elements,controlling the operation of guarantee the effectiveness of the financial decisions.Based on the enterprise operating the dynamic adjustment of capital as the research object,with corporate governance as the breakthrough point,with the help of trade off theory,principal-agent theory and contingency theory gradually working capital is discussed the principle of dynamic adjustment and dynamically adjust the operating capital may affect corporate governance,and combining with the study of Chinese manufacturing industry listed companies sample,to empirically research hypothesis.Considering manufacturing industry belongs to the capital and labor-intensive industry,the scale of investment in infrastructure,equipment,accounts receivable,inventory higher proportion of current assets,working capital impact on business performance is more important.And manufacturing listed companies usually integrating supply,production,sales business,compared with other industries,has a relatively complete working capital turnover link,the research of manufacturing listed companies working capital the dynamic adjustment of the research is not only beneficial to improve working capital management of manufacturing enterprises improve working capital,also can ensure the stability of working capital dynamically adjust the research conclusion,to avoid the interference of industry factors,but also provide beneficial reference to the research of other industries.Based on the 2000-2015 China's A shares Shanghai and Shenzhen manufacturing listed companies as samples,based on the trade-off theory,principal-agent theory and contingency theory,test whether enterprises exist the target working capital,and the empirical analysis of corporate governance in the working capital in the process of dynamic adjustment mechanism.There are three main contribution and innovation of this dissertation:(1)enterprises exist the target working capital,working capital adjustment behavior.In this dissertation,the study found that the enterprise is the target working capital,working capital and enterprise exists in the direction of the target adjustment trend.According to the dynamic balance and contingency theory,enterprise's working capital is not constant,it can produce change,according to the enterprise's internal and external factors influencing the working capital from its target.With the improvement of enterprises for working capital value,enterprise managers will actively seek the value of working capital adjustment and role,and as a result,the enterprise will later in the operation period,readjust the working capital,keep it in a reasonable range.(2)the dynamic adjustment of corporate governance to the enterprise working capital has an important influence.From the perspective of the different dimensions of corporate governance,ownership structure,the higher the proportion of the first largest shareholder,working capital adjustment speed is lower,the greater the degree of deviation from the corresponding working capital;The second to the tenth largest shareholder ownership concentration is higher,the adjustment of the working capital faster,and the smaller the deviation degree;Compared to the non-state enterprises,actual control of man-made central or local government company working capital adjustment speed is slower,but its effect on the deviation degree are not significant.Governance,the board of directors alone dong ratio adjustment speed play a promoting role of working capital,and reduces the deviation degree of the working capital;The chairman and general manager of two position by a person who is significantly reduced the working capital adjustment speed,but its working capital deviation degree of influence is not significant.Senior management governance,executive compensation for the promotion of working capital adjustment speed effect is significant,while executives shareholding effect is not obvious,and both are effectively reduce the deviation degree of working capital.The contribution of this dissertation and the possible innovation places mainly three points:(1)Enrich the research contents of working capitalAbout the working capital of dynamic adjustment both in domestic and abroad few studies,most of the research at home and abroad in the perspective of the static working capital(such as working capital management efficiency and management strategy),only the study of dynamic adjustment of also only pay attention to the adjustment process of working capital,lack of further analysis of the result of the adjustment.Adjust speed is the description of dynamic adjustment process in working capital,and the deviation degree reflects the early at this point in time the process of adjustment of the results.In this dissertation,combining with the working capital and adjust speed of deviation degree,comprehensive consideration the dynamic adjustment of working capital makes the research of working capital more comprehensive.(2)Extends the research perspective of working capitalIn coordinating the interests of internal participants as a kind of system arrangement,the corporate governance of enterprise financial management behavior has important and far-reaching influence.Existing studies focus on the macro economic fluctuation,financing constraints on the effect of dynamic adjustment of working capital,lack of research from the company level.Selected in this dissertation,in the perspective of corporate governance,corporate governance of the three dimensions,the working capital to carry out the research,on the one hand,is conducive to deepening understanding of working capital dynamic adjustment behavior,on the other hand also help about corporate governance in corporate financial decisions as an influence on the further understanding.(3)Using a variety of research methodsMost of the existing research on the target working capital,from the perspective of the relationship between working capital and corporate performance,in the perspective of the static nonlinear relationship of the two,to prove the existence of the optimal operation of the capital.The advantages of this approach is that the method is simple and easy to understand,but the disadvantage is that the method will be the company's financial management behavior as a static one-off decisions,lack of working capital ownership levels under the continuous phase Angle more changes and adjust the behavior of the research.This dissertation is improved,with the perspective of a dynamic target the existence of working capital.In empirical study,this article first through first-order auto regressive model,to the enterprise working capital mean "reply" phenomenon,preliminary prove the existence of the target working capital;Then,constructs the partial adjustment model of working capital,by examining the partial adjustment model is set up,prove that working capital movement within the enterprise is not a random chaotic fluctuations,nor a systemic mechanical cycle reciprocating motion,but around a certain target range continuously active approach of dynamic adjustment process,thus further verify the target working capital and working capital the existence of dynamic adjustment behavior.On the choice of specific regression method,this dissertation mainly through system GMM regression method for dynamic adjustment model,using the mixed effect model at the same time,fixed effect model and modified least-squares comparing virtual variable method inspection,to ensure the robustness of the conclusion.