CAPIC REVIEW

Journal of Accounting, Auditing and Business Management

ISSN 0718-4662

logo revista Capic Review
Vol. 18 (2020): CAPIC REVIEW
Investigation

Determinants of working capital and the cash conversion cycle in chilean companies

PDF (Español (España))
  • Francisco Javier Vásquez ,
  • Hernán Pape Larre
Francisco Javier Vásquez
Universidad Mayor
Hernán Pape Larre
Universidad de Atacama, Departamento de Industria y Negocios, Copiapó
Portada Volumen 18 Año 2020
DOI: https://doi.org/10.35928/cr.vol18.2020.107
Categories

Published 2021-04-12

Keywords

  • business life cycle,
  • cash conversion,
  • working capital

How to Cite

Vásquez , F. J., & Pape Larre, H. . (2021). Determinants of working capital and the cash conversion cycle in chilean companies. CAPIC REVIEW, 18, 1–15. https://doi.org/10.35928/cr.vol18.2020.107
Copyright Notice

Abstract

This research aims to identify and measure the degree of relationship between the main determinants of working capital and the cash conversion cycle of an influential group of large Chilean companies.
The research is descriptive and correlational, with a series of temporal data, in 2010-2019. The sample comprises 82 companies from different economic sectors, excluding financial institutions, and the information was gathered from the Economática database. Regression models with panel data are used, with traditional quantitative variables, such as the company's size and the tangibility of the assets, and qualitative variables, such as the stages of the company's life cycle.
The results allowed us to know the determinants of the working capital and the cash conversion cycle. In addition, we analyzed other financial variables, such as sales, profit margins, debt, and shares' book value. The results obtained are aligned with financial theory, such as the direct relationship between working capital needs with the size of sales and the cash conversion cycle and other effects outside of this logic, such as the inverse relationship of the assets' tangibility with the networking capital.
In addition to the significant relationships found, this study's main contribution consists of the incorporation of qualitative variables of the company's life cycle. These deliver different results in the models of net working capital and the cash conversion cycle, which invites us to review the methodology for obtaining the stages of companies' life cycle (Introduction, Growth, Maturity, Decline, Restructuring and Liquidation).

PDF (Español (España))

Downloads

Download data is not yet available.

References

  1. Arimany Serrat, N., & Gutierrez Eada, S. moya. (2015). Utilidad del Estado de Flujos de Efectivo para el análisis empresarial. Revista de Contabilidad y Dirección, 20, 195–217. Retrieved from https://accid.org/wp-content/uploads/2018/11/UTILIDAD_DEL_ESTADO_DE_FLUJOS_DE_EFECTIVO.pdf
  2. Baños-Caballero, S., García-Teruel, P. J., & Martínez-Solano, P. (2019). Net operating working capital and firm value: A cross-country analysis. BRQ Business Research Quarterly. https://doi.org/10.1016/j.brq.2019.03.003
  3. Baños, S., Martinez, P., & Garcia, P. (2014). Estrategias de financiación de las necesidades operativas de fondos y rentabilidad de la empresa * requirement and firm profitability. Estrategias de Financiación de Las Necesidades Operativas de Fondos y Rentabilidad de La Empresa, 117. Retrieved from file:///D:/SHEYLA/Archivos universidad/II ciclo/Metodología de la Investigación/Dialnet-EstrategiasDeFinanciacionDeLasNecesidadesOperativa-6280865.pdf
  4. Basila, D., Kargi, H. S., Aliyu, N. S., & Badara2, M. S. (2018). DETERMINANTS OF WORKING CAPITAL REQUIREMENT OF LISTED INDUSTRIAL FIRMS IN NIGERIA. African Journal of Management, 3(5), 136–153. Retrieved from https://saheljournalsonline.org.ng/testuploadc/Saajom_vol_3_5_10_2018.pdf
  5. Caro, N. P., Guardiola, M., & Arnaldo Ortiz, P. (2017). Árboles de clasificación como herramienta para predecir dificultades financieras en empresas Latinoamericanas a través de sus razones contables. Contaduría y Administración, 63(1), 1–14. https://doi.org/10.22201/fca.24488410e.2018.1148
  6. Chang, C. C. (2018). Cash conversion cycle and corporate performance: Global evidence. International Review of Economics and Finance, 56(January), 568–581. https://doi.org/10.1016/j.iref.2017.12.014
  7. Chauhan, G. S., & Banerjee, P. (2018). Financial constraints and optimal working capital – evidence from an emerging market. International Journal of Managerial Finance, 14(1), 37–53. https://doi.org/10.1108/IJMF-07-2016-0131
  8. Flores-Sánchez, G., Campoverde-Campoverde, J., Coronel-Pangol, T., Jiménez-Yumbla, J., & Romero-Galarza, C. (2019). Efecto de la gestión del capital circulante en la rentabilidad de las PyMEs en el sector de confecciones: Cuenca – Ecuador. Globalización, Competividad y Gobernabilidad, 13(3), 48–65. https://doi.org/10.3232/GCG.2019.V13.N3.02
  9. García Aguilar, J., Galarza Torres, S., & Altamirano Salazar, A. (2017). Importancia de la administración eficiente del capital de trabajo en las Pymes. Ciencia UNEMI, 10(c), 30–39. Retrieved from http://ojs.unemi.edu.ec/ojs/index.php/cienciaunemi/article/view/495
  10. Gitman, L. J., & Z. (2012). Principios de Administracion financiera (Pearson & Educacion, eds.).
  11. Karim, S., Umrie, R. H., Bakar, S. W., & Robiyanto, R. (2020). Moderating effect of business environment to working capital and profitability in Indonesia. 66(2), 1–19.
  12. Lamptey, L. L., Frimpong, K., & Morrison, A. B. (2017). Empirical Study on the Influence of Working Capital Management on Performance of SMEs in a Developing Economy. British Journal of Economics, Management & Trade, 17(4), 1–10. https://doi.org/10.9734/BJEMT/2017/33579
  13. Mongrut, S., Fuenzalida O’Shee, D., Cubillas Zavaleta, C., & Cubillas Zavaleta, J. (2014). Determinants of Working Capital Management in Latin American Companies. Innovar, 24(51), 5–17. https://doi.org/10.15446/innovar.v24n51.41235
  14. Nyeadi, J. D., Sare, Y. A., & Aawaar, G. (2018). Determinants of working capital requirement in listed firms: Empirical evidence using a dynamic system GMM. Cogent Economics and Finance, 6(1), 1–14. https://doi.org/10.1080/23322039.2018.1558713
  15. Palombini, N. V. N., & Nakamura, W. T. (2011). KEY FACTORS IN WORKING CAPITAL MANAGEMENT IN THE BRAZILIAN MARKET. Revista de Administração de Empresas, 52(1), 55–69. Retrieved from https://www.scielo.br/pdf/rae/v52n1/05.pdf
  16. Seth, H., & Chadha, S., Ruparel, N., Arora, P. K., & Sharma, S. K. (2020). Assessing working capital management efficiency of Indian manufacturing exporters. Managerial Finance, (March). https://doi.org/10.1108/MF-02-2019-0076
  17. Sharma, R. K., Bakshi, A., & Chhabra, S. (2020). Determinants of behaviour of working capital requirements of BSE listed companies: An empirical study using co-integration techniques and generalised method of moments. Cogent Economics and Finance, 8(1). https://doi.org/10.1080/23322039.2020.1720893
  18. Soukhakian, I., & Khodakarami, M. (2019). Working capital management , firm performance and macroeconomic factors : Evidence from Iran Working capital management , firm performance and macroeconomic factors : Evidence from Iran. Cogent Business & Management, 6(1). https://doi.org/10.1080/23311975.2019.1684227
  19. Van Horne, J. C., & Wachowicz, Jr., J. M. (2010). Fundamentos de Administración Financiera (P. E. De & México, eds.).
  20. Yilmaz, I., & Acar, G. (2019). THE EFFECT OF CASH CONVERSION CYCLE ON PROFITABILITY IN OMANI COMPANIES. International Journal of Economics, Management and Accounting, 2(2), 269–290. Retrieved from https://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/654

CHILEAN UNIVERSITIES

FOREIGN UNIVERSITIES

Code under GNU license: OJS PKP