China’s Central Enterprises Listing Corporation Working Capital And Firm Value

Only by creating more value,enterprises can survive for a long time and developsustainably. Enterprises can create more value when the management of its workingcapital is efficient. The strength of its working capital management capabilitiesdirectly determines the strength of the profitability of the company. However, on thecurrent situation of most companies in China, many of which have no clear andspecific working capital management policy.They are just more concerned aboutsome single project of working capital, while less concerned about the overallworking capital and not consider capital management as a whole system. Furthermore,when making working capital policy,they did not combine it with the enterprise valuewhich is of great value. Most enterprises managed themselves according to their ownexperience, tended to consider short-term profitability, and hoped to earn high profitin the short term, while ignoring the long-term and sustainable development of theenterprises.Therefore, enterprises need to develop appropriate working capital investmentand financing policies, to improve the ability of enterprises to create value, so as topromote the sustainable and healthy development of rational management of workingcapital.Firstly, the paper reviews some papers of research related to the working capitalmanagement, and analyze the theory and study of working capital management andenterprise value in detail. Secondly, the paper collects relevant financial data ofworking capital management and enterprise value about China’s central enterprises(referred to as the "central enterprises") from2010to2011. Thirdly, through theestablishment of a regression model and empirical analysis, a clear relationshipbetween China’s central enterprises listed company working capital management andenterprise value.The conclusion is: in the central enterprises listed companies, cashflow and enterprise value are an inverted U-shaped relationship; at the same time, therelationship between the working capital investment and financing policies andenterprise value are significantly negatively correlated; and the paper analyzes therelationship between the amount of working capital and corporate value quantity by grouping.Finally, the paper comes up with some measures about improving the efficiencyof capital management and the central enterprises listed companies needs to payattention in some aspects, such as maintaining appropriate cash flow,optimizing theoperation of the capital structure, establishing reasonable measures of working capitalinvestment and financing and so on.