Working Capital Management and Profitability: Evidence from Manufacturing Sector in Malaysia
- *Corresponding Author:
- Shaharudin Jakpar
Faculty of Economics and Business
University Malaysia Sarawak (UNIMAS), Malaysia
E-mail: [email protected]
Received Date: February 08, 2017; Accepted Date: March 22, 2017; Published Date: April 02, 2017
Citation: Jakpar S, Tinggi M, Siang TK, Johari A, Myint KT, et al. (2017) Working Capital Management and Profitability: Evidence from Manufacturing Sector in Malaysia. J Bus Fin Aff 6: 255. doi: 10.4172/2167-0234.1000255
Copyright: © 2017 Jakpar S, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
The purpose of this study is to examine the effect of working capital management on firm’s profitability. The study is based on a sample of 164 manufacturing firms listed on the Main Board of Bursa Malaysia, covering a span of five years from 2007 to 2011. A discriminatory panel regression and Pearson correlation are used to test the hypotheses. The empirical evidence found that there is existence of significant positive relationship between exogenous variables, the average collection period, inventory conversion period and firm’s size and its endogenous variable, which is firm’s profitability. The findings also show a significant inverse relationship between debt ratio (leverage) and firm’s profitability, but the firm’s capability to translate working capital into cash promptly, as proxy in log cash conversion cycle has no impact on firm’s profitability.