THE EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF CONSTRUCTION COMPANIES LISTED IN VIETNAM
Keywords:
Profitability, Working Capital Management, Cash Conversion Cycle, Inventory Conversion Period, Accounts Receivable Period, Accounts Payable Period, Public Listed Companies’, Construction Sector, Vietnam Stock Exchange, Panel data and regression analysisAbstract
The study aims at examining the statistical significance between the working capital management and profitability of listed companies in construction sector of Vietnam. For this purpose, profitability is used as dependent variable and independent variable is working capital management.
Working capital management (WCM) is further split into the main components in WCM which includes inventory conversion period (ICP), average receivable period (ARP) and average payable period (APP), and used as WCM measurements, while profitability is measured through return on assets (ROA).
WCM is considered as an essential tool for firm growth and profitability and is required to manage effectively for every firm to minimize risk of failing to pay for short-term commitments. Previous studies revealed a significant relationship either positive or negative on working capital management towards firm profitability and this research is in line with the previous literature reviews and in support of the past researches.
Considering the above objective, the study adopts quantitative based correlation approach. A total of 34 companies listed in the construction sector of Vietnam Stock Exchange for a period of five years from 2013-2017, used for the research and data analysis is conducted using secondary sources with the application of panel data methodology and regression model.
