Business Management Dynamics

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ISSN: 2047-7031

bmd Business and Management Dynamics bmd
ISSN: 2047-7031  
Volume  5   Issue 10  2016  
Article Abstract
Impact of Working Capital Management on Market Return: A Comparative Study of Pakistan and Indian Chemical Sector
Keywords:  Working Capital Management, Tobin’s Q, Chemical Sector, Pakistan, India
Muhammad Akram , Sulaman Jamil , Najaf Ali , Bilal Ali , Abdulsattar , Waqas Khan
Working Capital Management is an excellent tool that is used by a lot of companies to improve their earnings. This concept is used to manage the arrangement of its short term asset and short term liabilities. The present study is a comparative study to test the impact of working capital management on market return of chemical sector in Pakistan and India. The chemical companies listed in the Karachi Stock Exchange (KSE) of Pakistan and National Stock Exchange (NSE) of India, were studied for a period of 14 years from 1998 to 2011. In all 30 out of 36 chemical companies from Pakistan and 44 out of 53 chemical companies from India were included in the study as a sample with complete financial data. Market return is used as dependent variable and working capital management with its key measures (ACP, APP, Inventory turnover, CCC, CATAR, CLTAR, FDR, CR, CATSR and Firm Size ) used as independent variables. Statistical measures as descriptive statistics, Pearson's correlation and panel regression methods were used for data analysis. The results of the study showed that there is a positive significant relationship of Average Payment Period (APP), Cash Conversion Cycle (CCC), Financial Debt Ratio (FDR), Current Assets to Total Assets Ratio (CATAR) with market return in Pakistan and Inventory Turnover, Current Assets to Total Assets (CATAR), Firm Size with Market Return in India. Similarly, there is negative significant relationship between Average Collection Period (ACP), Current Assets to Total Sales Ratio (CATSR) with market return in Pakistan and Average Collection Period (ACP), Average Payment Period (APP), Financial Debt Ratio (FDR), Current Liability to Total Assets Ratio (CLTAR), Current Assets to Total Sales Ratio (CATSR) with market return in India. These results show that in improving the market return (shareholder's wealth), the working capital management plays an important role in chemical sector.
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