Study Of The Relationship Between Management Efficiency Of Operational Working Capital And Financial Crisis

In the age of the post financial crisis era where the financial crisis has still being deeply influencing the whole world economy, it is difficult to finance, thus many enterprises were in the shortage of liquidity. In this difficult situation, enterprises that tap the potential to improve their ability against the "cold" will be the final winner in the competition. Liquidity is the core of enterprises’ financial management of all times, and the key factor ensuring this core is working capital management. In the modern economy, working capital is known as enterprises’ flowing blood, and the level of working capital management would not only affect the enterprise in whether there are sufficient funds for daily production and business activities, but also it is the foundation of their existence and development. Our country’s enterprises’ working capital management efficiency is generally low, especially when compared to the developed countries like America, and there is a big gap. Under the stagnant situation of both the globalized competition and the world economy, the low efficiency of working capital management has become the enterprises’ resistance of further development and short board as well. Although the enterprises’ consciousness of working capital management has been awakened, and they also put a lot of man-power and financial resources into this area, but the results are not what we desired. One of the reasons is that the research and development of our country at the working capital management in the present stage is not mature, and the relevant theory are not tightly combined to the practice, which is why it is unable to effectively guide the practice of enterprises. Working capital management is an important content of enterprise financial management, and the effectiveness determines the survival and development of enterprises. However there’s rarely empirical study on the direct relationship between management efficiency of operating working capital and the enterprise financial crisis, which gives us a chance to research for this.Recent researches are mostly focused on evaluation indicators, and researchers have not realized the impact of working capital management on financial crisis in our country. For example, when calculating the inventory turnover period, account receivable turnover period, account payable turnover period and working capital turnover period and so on, the essence is to evaluate the turnover efficiency or the amount the operational working capital is occupied, and to evaluate corporate profitability indirectly, but without the direct verification of the profit index. And low efficiency of working capital management can probably lead bankruptcy and failure. In fact, under the premise of guarantee the liquidity and safety of operating funds, to efficiently manage the working capital can improve the usage level and turnover capacity as well as the overall profitability of the enterprise. In order to analyze the applicability of foreign empirical results’ to our country’s capital market and whether there are any significant differences in manufacturing and retail enterprises of the supply chain, and to formulate the specific policies of working capital management and make enterprises pay more attention to working capital management, this paper makes an empirical analysis on the correlation between management efficiency of operational working capital and financial crisis of listed companies in China’s Shanghai and Shenzhen stock markets from 2008 to 2012, and also makes similar studies on manufacturing and retail listed company as sub-samples. In order to reveal the degree of impact each compositing factor of operational working capital turnover period has on this relationship, this paper also studies the correlation between account receivable turnover period, inventory turnover period, account payable turnover period and financial crisis respectively. This paper firstly introduce recent research results of the correlation between efficiency of operational working capital management and financial crisis, and proposes research purposes and significances, research ideas and methods. Upon the basis of summary and evaluation of related literature both at home and abroad, this paper then proposes the perspective and category of the empirical research. After theoretical analysis, we have put forward four basic assumptions. Those assumptions are Hl: there is a negative correlation between operational working capital management efficiency and financial crisis; H2-a: there is a positive correlation between account receivable turnover period and financial crisis; H2-b: there is a positive correlation between inventory turnover period and financial crisis; H2-c: there is a negative correlation between account payable turnover period and financial crisis. Finally we put relevant sample data into the regression model and make a comprehensive analysis of the empirical results, then get the conclusions of this paper.This paper makes breakthroughs in research methods, perspectives and classification, especially in making analysis on manufacturing and retail trading listed companies as sub-samples when studying the relationship between the management efficiency of working capital and financial crisis about the entire industries’ listed companies. Through the analysis, we found negative correlation between the management efficiency of working capital and the financial crisis, in other words, the enterprise can improve the management efficiency of operating working capital to prevent the occurrence of financial crisis.