Relationship between working capital management and firm's performance : Evidence from listed companies on hose

Abstract

The objective of the research presented here is to study the relationship of working capital management and the performance of listed Vietnamese firms for the period from 2008 to 2012. The writer collects and finalizes a data set of 110 non-financial listed firms on HOSE over this five year period. Descriptive statistics show a worse trend in the liquidity and declining profitability of the studied firms from year to year, which partly reflect the picture of the economy in recent years. Regression result indicates a negative correlation between cash conversion cycle (as a proxy for working capital management) and return on asset (as a proxy for firm’s profitability). It is suggested that Vietnamese firms should focus on shortening the cash cycle by enhancing cash flow management measures and reviewing receivables policy to improve profitability. Keywords: Working capital management, profitability, cash conversion cycle