This paper analyses the determinants of working capital investments of 92 companies listed on the Johannesburg Stock Exchange (JSE) over the period 2001-2010. Working capital management has grown in significance from being a survival... more
This paper analyses the determinants of working capital investments of 92 companies listed on the Johannesburg Stock Exchange (JSE) over the period 2001-2010. Working capital management has grown in significance from being a survival issue to a strategic and competitive tool. Using the Generalized Method of Moments estimation, the study found that firms pursue target levels of current assets. However, the adjustment process is relatively slow. The study found that leverage, short-term finance and fixed investment significantly influence the level of working capital investment, while operating cash flows, state of the economy, firm size and sales growth rate were found to be statistically insignificantly related to working capital investment. The study recommends that managers understand the driving factors of working capital investment since working capital investment influences the value of the firm.
The 2008/2009 financial crisis resulted in renewed interest in the usually neglected subject working capital management by both practitioners and researchers because of the scarcity and high cost of funds of financial markets during the... more
The 2008/2009 financial crisis resulted in renewed interest in the usually neglected subject working capital management by both practitioners and researchers because of the scarcity and high cost of funds of financial markets during the crisis. In this study, the author uses a balanced panel of 85 firms listed on Johannesburg Stock Exchange over the period 2001-2010 to analyze the linkages between investment in fixed and working capital and financing constraints. Using the generalized method of moments (GMM) estimation on the panel data for these firms, the author finds that working-capital investment is sensitive to fixed capital investment and cash-flow fluctuations. The study contends that good working capital management may help firms to alleviate the effects of financing constraints on fixed investment. Finally, the study suggests some policy implications for the managers and investors in South African markets.
This paper explores the factors influencing the use of trade credit as a source of finance for companies listed on the JSE Securities Exchange (JSE). The study uses a balanced panel data collected for 92 companies for the period of... more
This paper explores the factors influencing the use of trade credit as a source of finance for companies listed on the JSE Securities Exchange (JSE). The study uses a balanced panel data collected for 92 companies for the period of 2001-2010 and employs the generalized method of moments (GMM) estimation technique in order to control for unobservable heterogeneity and potential endogeneity problems. The evidence obtained from the study suggests that firms have a target level of account payable and that firm internally-generated resources, investment opportunities and short-term financial debt play an important role in the use of trade credit as a short-term source of financing among the listed companies. Finally, the study recommends that firms pay attention to relationships with their suppliers as their supply of goods on credit is an important source of funding.
Submitted in partial fulfillment of the requirements for the degree of Masters of Management Sciences Business Administration, Durban University of Technology. Durban, South Africa, 2017.
