The Analysis For Working Capital Management Of Listed Companies And Corporate Performance

Working Capital, also known as working capital, revolving funds, is required for corporations to maintain the daily operation. Working capi(?)al contents the broad and the narrow concepts. The broad working capital refers to the total amount of the company's current assets; while the narrow working capital refers to the surplus between current assets and current liabilities. Working Capital in this paper mentions the narrow concept. Accordingly, working capital management includes both current assets management and current liabilities management.Working capital management is an important part in short-term financial management. Not only is working capital a significant component of corporate assets, but also the most dynamic part of the overall corporation assets with their input and the cycle of recovery an ongoing process. Only the working capital in constant and effective management and operation, the company can guarantee all aspects of convergence, such as the supply, production and marketing. Accordingly, enterprises can survive and development. Therefore, the importance of working capita! is self-evident.In reality, there are many cases in which poor working capital management accelerate the corporation's bankruptcy and reorganization. For example, in the United States, Kmart served as the second-largest supermarket with 100 years of history, applied for bankruptcy protection in 2003. The trigger to bankruptcy was that Kmart had not paid the payables in the past week to its most important food supplier-Fleming Companies. The companies decided to suspend its supply, which triggered a series of chain reactions. For another example, though Ferro China has had an enviable performance, it could not repay the maturing loans for working capital and seek reorganization in 2008. The reorganization became a classic example for "the biggest case of corporate reorganization" after the implementation of China's new bankruptcy law.In recent years, foreign scholars conduct a lot of research on working capital management. However, Chinese scholars began to research on working capital management later than their foreign peers having not recognize the importance of working capital. Thus, it is necessary to increase the relevant analysis and research targeted to working capital management in order to provide some reference to corporation to some extent.The purpose of this article is to analyze the relation between working capital management and corporation performance using the data of Manufacturing corporations listed in A-share market of Shanghai and Shenzhen exchange from 1999 to 2008. Chapter 3 serves as descriptive empirical analysis section. In this section, proxies representing working capital investment policy, working capital financing policy and the efficiency of working capital management, are selected to evaluate the situation of working capital management in manufacturing companies during ten years. In chapter 4, the regression analysis section, two regression models are designed on basis of relevant hypothesis. The first model is to analyze the relation between working capital policy and corporation performance, while the second one is to analyze the relationship between the efficiency of working capital management and corporation performance. We make comprehensive analysis of the empirical results and draw some conclusions in Part 5.The empirical analysis shows that, manufacturing corporations in the sample have been using a sound investment policies and aggressive working capital financing policies. Though the efficiency of working capital management has been improving to some extent in recent years, there are still large gaps compared with foreign corporation. In addition, this article verifies the underlying hypothesis. For example, with sufficient liquidity and security of working capital, strengthening the efficiency of working capital management can improve the utilization and turnover of working capital, as well as corporations'profitability.There are some innovations in this article. To begin with, it is the first time to evaluate working capital management of listed corporations in aspects of both working capital policy and the efficiency of working capital management. Secondly, both Tobin's Q and ROE are used as the variables on behalf of company's performance respectively, which make the conclusions more reasonable. Finally, add some control variables in the regression analysis models to exclude the impacts from some factors on business performance, which make the conclusions more objective.