营运资本管理外文文献翻译.docx

1、营运资本管理外文文献翻译文献信息：文献标题：Impact of Aggressive Working Capital Management Policy on Firms Profitability（激进的营运资本管理政策对企业盈利能力的影响）国外作者：Mian Sajid Nazir，Talat Afza文献出处：The IUP Journal of Applied Finance,2009,Vol.15,PP19-30字数统计：英文2669单词，14456字符；中文4407汉字外文文献：Impact of Aggressive Working Capital Management Poli

2、cy on Firms ProfitabilityIntroductionThe corporate finance literature has traditionally focused on the study of long-term financial decisions, particularly investments, capital structure, dividends or company valuation decisions. However, short-term assets and liabilities are important components of

3、 total assets and need to be carefully analyzed. Management of these short-term assets and liabilities warrants a careful investigation since the working capital management plays an important role in a firms profitability and risk as well as its value (Smith, 1980). Efficient management of working c

4、apital is a fundamental part of the overall corporate strategy in creating the shareholders value. Firms try to keep an optimal level of working capital that maximizes their value (Deloof, 2003; Howorth and Westhead, 2003 and Afza and Nazir, 2007).In general, from the perspective of Chief Financial

5、Officer (CFO), working capital management is a simple and straightforward concept of ensuring the ability of the organization to fund the difference between the short-term assets and short-term liabilities (Harris, 2005). However, a Total approach is desired as it can cover all the companys activiti

6、es relating to vendor, customer and product (Hall, 2002). In practice, working capital management has become one of the most important issues in the organizations where many financial executives are struggling to identify the basic working capital drivers and an appropriate level of working capital

7、(Lamberson, 1995). Consequently, companies can minimize risk and improve the overall performance by understanding the role and drivers of working capital management.A firm may adopt an aggressive working capital management policy with a low level of current assets as a percentage of total assets, or

8、 it may also be used for the financing decisions of the firm in the form of high level of current liabilities as a percentage of total liabilities. Excessive levels of current assets may have a negative effect on the firms profitability, whereas a low level of current assets may lead to a lower leve

9、l of liquidity and stockouts, resulting in difficulties in maintaining smooth operations (Van Horne and Wachowicz, 2004).The main objective of working capital management is to maintain an optimal balance between each of the working capital components. Business success heavily depends on the financia

10、l executives ability to effectively manage receivables, inventory, and payables (Filbeck and Krueger, 2005). Firms can reduce their financing costs and/or increase the funds available for expansion projects by minimizing the amount of investment tied up in current assets. Most of the financial manag

11、ers time and efforts are allocated towards bringing non-optimal levels of current assets and liabilities back to optimal levels (Lamberson, 1995). An optimal level of working capital would be the one in which a balance is achieved between risk and efficiency. It requires continuous monitoring to mai

12、ntain proper level in various components of working capital, i.e., cash receivables, inventory and payables, etc.In general, current assets are considered as one of the important components of total assets of a firm. A firm may be able to reduce the investment in fixed assets by renting or leasing p

13、lant and machinery, whereas the same policy cannot be followed for the components of working capital. The high level of current assets may reduce the risk of liquidity associated with the opportunity cost of funds that may have been invested in long-term assets. Though the impact of working capital

14、policies on profitability is highly important, only a few empirical studies have been carried out to examine this relationship. This study investigates the potential relationship of aggressive/conservative policies with the accounting and market measures of profitability of Pakistani firms using a p

15、anel data set for the period 1998-2005. The present study is expected to contribute to better understand these policies and their impact on profitability, especially in emerging markets like Pakistan.Research MethodologyVariables Used in the StudyThis study uses aggressive investment policy as used

16、by Weinraub and Visscher (1998), who analyzed working capital policies of 126 industrial firms in the US market. Aggressive Investment Policy (AIP) results in minimal level of investment in current assets versus fixed assets. In contrast, a conservative investment policy places a greater proportion

17、of capital in liquid assets with the opportunity cost of less profitability. If the level of current assets increases in proportion to the total assets of the firm, the management is said to be more conservative in managing the current assets of the firm. In order to measure the degree of aggressive

18、ness of working capital investment policy, the following ratio was used:where a lower ratio means a relatively aggressive policy.On the other hand, an Aggressive Financing Policy (AFP) utilizes higher levels of current liabilities and less long-term debt. In contrast, a conservative financing policy

19、 uses more long-term debt and capital and less current liabilities. The firms are more aggressive in terms of current liabilities management if they are concentrating on the use of more current liabilities which put their liquidity on risk. The degree of aggressiveness of a financing policy adopted

20、by a firm is measured by working capital financing policy, and the following ratio is used:where a higher ratio means a relatively aggressive policy.The impact of working capital policies on the profitability has been analyzed through accounting measures of profitability as well as market measures o

21、f profitability, i.e., Return on Assets (ROA) and Tobins q. These variables of return are calculated as:Tobins q compares the value of a company given by financial markets with the value of a companys assets. A low q (between 0 and 1) means that the cost to replace a firms assets is greater than the

22、 value of its stock. This implies that the stock is undervalued. Conversely, a high q (greater than 1) implies that a firms stock is more expensive than the replacement cost of its assets, which implies that the stock is overvalued. It is calculated as:where Market Value of Firm (MVF) is the sum of

23、book value of long plus short term and market value of equity. Market value of equity is calculated by multiplying the number of shares outstanding with the current market price of the stock in a particular year.Control VariablesIn working capital literature, various studies have used the control va

24、riables along with the main variables of working capital in order to have an apposite analysis of working capital management on the profitability of firms (Lamberson, 1995; Smith and Begemann, 1997; Deelof, 2003; Eljelly, 2004; Teruel and Solano, 2005 and Lazaridis and Tryfonidis, 2006). On the same

25、 lines, along with working capital variables, the present study has taken into consideration some control variables relating to firms such as the size of the firm, the growth in its sales, and its financial leverage. The size of the firm (SIZE) has been measured by the logarithm of its total assets,

26、 as the original large value of total assets may disturb the analysis. The growth of firm (GROWTH) is measured by variation in its annual sales value with reference to previous years sales(Salest Salest 1)/Salest 1. Moreover, the financial leverage (LVRG) was taken as the debt to equity ratio of eac

27、h firm for the whole sample period. Some studies, like Deloof (2003) in his study of large Belgian firms, also considered the ratio of fixed financial assets to total assets as a control variable; however, this variable cannot be included in the present study because of unavailability of data, as mo

28、st of the firms do not disclose full information in their financial statements. Finally, since good economic conditions tend to be reflected in a firms profitability (Lamberson, 1995), this phenomenon has been controlled for the evolution of the economic cycle using the GDPGR variable, which measure

29、s the real annual GDP growth in Pakistan for each of the study year from 1998 to 2005.Statistical AnalysisThe impact of aggressive and conservative working capital policies on the profitability of the firms has been evaluated by applying the panel data regression analysis. The performance variables

30、(ROA and Tobins q) as well as the TCA/TA and TCL/TA along with the control variables were regressed using the SPSS software. The following regression equations are run to estimate the impact of working capital policies on the profitability measures.where,TCA/TA=Total current assets to total assets r

31、atioTCL/TAi=Total current liabilities to total assets ratioROAi=Return on assetsTobins qi=Value of qSIZE i=Natural log of firm sizeGROWTHi=Growth of salesLVRGi=Financial leverage of firmsGDPGR i=Real Annual GDP growth rate of Pakistan =Intercept; and =Error term of the modelSample and DataThe sample

32、 of the study consists of all non-financial firms listed on the Karachi Stock Exchange (KSE). KSE has divided the non-financial firms into various industrial sectors based on their nature of business. In order to be included in the sample, a firm must be in business for the whole study period. Also, firms should neither have been delisted by the KSE nor merged with any other firm during the whole window period. New incumbents in the market during the study period have also not been included in the sample. Furthermore, firms must have complete data for the period 1998-200