How do market imperfections affect working capital management?

This paper examines whether Working Capital Management (WCM) is sensitive to market imperfections such as asymmetric information, agency conflicts or financial distress. We find that firms have a target investment in working capital and that they take decisions in order to achieve this. In addition, the results appear to support the hypothesis that the working capital competes with investment in fixed assets for the funds of the firms when they have financial constraints. Finally, we also find that WCM depends on bargaining power and other financial factors such as the availability of internal finance, cost of financing and access to capital markets. Este artículo analiza si la gestión del capital circulante está afectada por las imperfecciones de mercado tales como la asimetría informativa, los conflictos de agencia o las dificultades financieras. Los resultados muestran que las empresas tienen un nivel de inversión en capital circulante objetivo y toman decisiones con el fin de alcanzarlo. Además, los resultados parecen apoyar la hipótesis de que el capital circulante compite con los activos fijos por los fondos de las empresas cuando éstas tienen restricciones financieras. Finalmente, la gestión del capital circulante depende del poder de negociación y otros factores financieros tales como la disponibilidad de financiación interna, el coste de financiación y el acceso a los mercados de capitales.ciclo de efectivo, gestión del capital circulante, imperfecciones de mercado, datos de panel net trade cycle, working capital management, market imperfections, panel data

Determinants of working capital management

This paper analyzes the determinants of working capital management (WCM) for a sample of Spanish firms during the period 1997-2004. We find that firms have a target investment in working capital and that they take decisions in order to achieve this. The results appear to support the hypothesis that the working capital competes with investment in fixed assets for the funds of the firms when they have financial constraints. Finally, we also find that WCM depends on bargaining power and other financial factors such as the availability of internal finance, cost of financing and financial constraints.Research Agency of the Spanish Government ECO2008-06179/ECO

Financing of working capital requirement, financial flexibility and SME performance

This paper investigates the relation between the financing strategies of working capital requirement and firm performance for the period 1997 to 2012. Using the two-step generalized method of moments estimator, we find that a suitable financing strategy can help firms improve their performance. Moreover, the results indicate that the working capital requirement financing-performance relation changes during a financial crisis. Finally, we also find that this relation depends on a firm’s financial flexibility. The findings are of interest for managers and researchers and show that managers should not only be concerned about investing in working capital requirement but also consider how this investment is to be financed. To the best of our knowledge, this is the first paper to analyse how the financing strategy selected by firms to finance their working capital requirement affects their performance

Erratum

"Erratum." Journal of Business Economics and Management, 18(1), p. 181

Ensayos sobre gestión financiera del capital circulante = Essays on working capital management.

Palabras clave: Gestión del capital circulante Necesidades operativas de fondos Valor de la empresa Restricciones financieras Resumen en castellano: Esta Tesis tiene como objetivo analizar la gestión de los activos y pasivos corrientes de la empresa de forma conjunta. La importancia de estas partidas se refleja en los numerosos estudios realizados sobre clientes, proveedores, inventarios y tesorería. No obstante, la literatura previa sugiere que estos componentes del capital circulante se encuentran interrelacionados, y los directivos los gestionan conjuntamente. Por tanto, esta Tesis estudia los factores determinantes del capital circulante, y el efecto de sus estrategias de inversión y financiación en el valor. Además, se analizan muestras de distinto tamaño (empresas cotizadas y pymes) para tener en cuenta los efectos de la asimetría informativa y las restricciones financieras. Los resultados indican que las empresas tienen un nivel objetivo de inversión en capital circulante, al que tratan de ajustarse de forma relativamente rápida. Además, las estrategias de inversión y financiación del capital circulante seguidas por las empresas afectan a su valor. Resumen en ingles: This thesis analyzes the operating assets and liabilities jointly, rather than individually. As several previous works indicate, operating assets and liabilities influence each other and, hence, they must ultimately be managed jointly. However, most studies have focused on them individually. Accordingly, this thesis analyzes the working capital requirement (WCR henceforth) of firms. Specifically, this research examines the determinants of WCR, and investigates both the effect of WCR investment and WCR financing strategies on firms' performance. In addition, since firms' asymmetric information and financial constraints might also influence their WCR decisions, this research examines the WCR investment and financing decisions for both non-quoted SMEs and quoted firms. Results indicate that firms have a target WCR level and they adjust their current WCR to their target relatively quickly. Moreover, the findings demonstrate that both the investment in WCR and the WCR financing strategies affect a firm's value

Investment in trade credit in small business start-ups: Evidence from Spain during a financial crisis

© 2022. Taylor and Francis Group. This document is made available under the CC-BY-NC 4.0 license http://creativecommons.org/licenses/by-nc /4.0/ This document is the submitted/accepted/ published version of a published Work that appeared in final form in Applied Economics. To access the final edited and published work see https://doi.org/10.1080/00036846.2022.2086685This study analyses start-up firms’ investment in trade credit during the period 2011-2014. We find that new or recently created firms had greater investments in trade credit than established firms. Moreover, the results indicate that start-up firms’ investment in trade credit did not depend on their bargaining power or access to external finance. These findings suggest that the reason start-ups invested more in accounts receivable than established firms could be due to late payments or their granting credit to low-quality customers who cannot obtain credit from established firms

Estrategias de financiación de las necesidades operativas de fondos y rentabilidad de la empresa

Este trabajo estudia la relación entre la financiación de las necesidades operativas de fondos (NOF) y la rentabilidad financiera de la empresa. La deuda a corto plazo tiene menores costes que los recursos financieros a largo plazo, sin embargo también supone un mayor riesgo de refinanciación y de tipo de interés. Los resultados obtenidos ponen de manifiesto que una adecuada estrategia de financiación de las NOF puede ayudar a mejorar los resultados de la empresa. En concreto, se observa que durante la etapa de expansión económica 1997- 2007, las empresas que financian un elevado porcentaje de sus NOF con deuda bancaria a corto plazo, así como las que usan este tipo de financiación de forma reducida, presentan una menor rentabilidad financiera, mientras que una política intermedia de financiación ofrece mejores resultados. Sin embargo, durante un periodo de crisis financiera caracterizado por fuertes dificultades para el acceso al crédito (2008-2012) son las empresas que financian un mayor porcentaje de sus NOF con recursos financieros a largo plazo (y que, por tanto, recurren en menor medida al crédito bancario a corto plazo) las que presentan mayor rentabilidad

Trade credit, creditor protection and banking crisis

© 2023 Elsevier Inc. This document is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ This document is the published version of a published Work that appeared in final form in Global Finance Journal. To access the final edited and published work see https://doi.org/10.1016/j.gfj.2023.100834This paper analyzes the effect of banking crises on the trade credit provided to customers and whether this effect depends on the strength of a country's legal protection of creditors. The results indicate that trade credit extensions increase in times of crisis, although this increase is smaller in countries where creditors are well protected; however, no differences are observed in trade credit extensions between countries with weak and strong creditor protection in non-crisis periods

The speed of adjustment in net operating working capital: an international study

© 2021. Taylor and Francis Group. This document is made available under the CC-BY-NC 4.0 license http://creativecommons.org/licenses/by-nc /4.0/ This document is the submitted/accepted/ published version of a published Work that appeared in final form in Spanish Journal of Finance and Accounting. To access the final edited and published work see https://doi.org/10.1080/02102412.2020.1864176This paper analyses whether there are differences in the speed of adjustment in net operating working capital (NWC) across countries. Unlike prior research, which reported that the adjustment speed of any current item is always rapid, we find that the speed of adjustment to NWC targets depends on a country’s investor protection and financial development. Specifically, using a sample of firms from 30 countries, we show that NWC adjustment speeds vary across countries, and they are faster for companies that operate in countries with stronger investor protection and greater financial development

Net operating working capital and firm value: a cross-country analysis

© 2020. The authors. This document is made available under the CC-BY 4.0 license http://creativecommons.org/licenses/by /4.0/ This document is the published version of a published Work that appeared in final form in Nature Comminications. To access the final edited and published work see https://doi.org/10.1177/2340944420941464Here we use a sample of firms from 30 countries during the period 1995-2013 to examine the relationship between net operating working capital (NWC) and firm value. Specifically, we show that the value of NWC varies across countries and that it depends on both investor protection and a country’s financial and economic development. Our findings imply that shareholders value NWC more in countries with strong enforcement of investor rights, and greater financial and economic development