Sinh viên không điền bất cứ thông tin gì liên quan đến người thực hiện và người hướng dẫn trong đề BỘ GIÁO DỤC VÀ ĐÀO TẠO ĐẠI HỌC KINH TÉ THÀNH PHÓ HÒ CHÍ MINH BÁO CÁO TÔNG KẾT ĐÈ TÀI NGHIÊN cứu KHOA HỌC THAM GIA XÉT GIẢI THƯỞNG ‘’NHÀ NGHIÊN CỨU TRẺ UEH” NĂM 2024 <THE EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF MANUFACTURING COMPANIES LISTED ON VIET NAM STOCK EXCHANGE> Thuộc nhóm chuyên ngành :. Hồ Chí Minh, tháng 2/2024 I ABSTRACT This study aims to investigate the relationship between working capital management and profitability of manufacturing companies. The data was collected and aggregated based on the audited financial reports of 171 listed manufacturing companies on the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) over a period of 12 years (from 2008 to 2019). With the assistance of specialized software Stata, the results show a negative relationship between average customer receivable period (ARP), average inventory period (AIP), average payables period (APP), and cash conversion cycle (CCC) with profitability.
Therefore, managers can enhance the company's profitability by reducing the cash conversion cycle, net operating cycle, and its components to an optimal level. Furthermore, controlling variables including liquidity, leverage, company size, and company growth also have a significant impact on profitability. These findings contribute to improving financial management efficiency for businesses and provide additional reference materials for the Vietnamese market. Keywords: WCM, working capital management, profitability.
II TABLE OF CONTENTS 1. Subject and Scope. Working Capital Management. Empirical Studies in the world.
Empirical Studies in Viet Nam. Average Receivable Period. Average Inventor}' Period. Average Payable Period.
Cash Conversion Cycle. RESEARCH MODELS AND METHODOLOGY. Data and Sample. Methods of Collecting Documents and Data.
Data Processing and Analysis Methods. ANALYSIS OF RESULTS AND DISCUSSION. Regression Assumptions Test. The average value of the errors is equal to 0.
Heteroscedasticity and Autocorrelation Test. Standard Normal Distribution of Residuals Test. Correcting Model Defects. CONCLUSIONS AND RECOMMENDATIONS.44 IV LIST OF TABLES Table 1: Variable Measurements and Abbreviations.
17 Table 2: Descriptive Statistics. 20 Table 3: OLS Regression Results. 24 Table 4: FEM Regression Results. 25 Table 5: REM Regression Results.
26 Table 6: Results of Hausman Test. 28 Table 7: Variance Inflation Factor.29 Table 8: Results of Heteroscedasticity and Autocorrelation Test. 30 Table 9: Skewness/Kurtosis tests for Normality. 32 Table 10: GLS Regression Results.35 Table 11: Hypotheses Conclusions.
39 V LIST OF FIGURES Figure 1: Correlation Matrix Analysis. 23 Figure 2: Normal Distribution of Residuals of Model 1. 32 Figure 3: Normal Distribution of Residuals of Model 2. 33 Figure 4: Normal Distribution of Residuals of Model 3.
33 Figure 5: Normal Distribution of Residuals of Model 4. 34 VI LIST OF ACRONYMS ACRONYMS DEFINITION WCM Working capital management ARP Average receivable period AIP Average inventory period APP Average payables period CCC Cash conversion cycle HOSE Ho Chi Minh Stock Exchange HNX Ha Noi Stock Exchange ROA Return on assets ROE Return on equity GDP Gross Domestic Product 2 1. Overview Working capital management is crucial for the financial health and sustainability of a business. It involves the efficient management of a company's current assets and liabilities to ensure smooth operations, meet short-term obligations, and support growth.
Working capital or net working capital is the difference between current assets and current liabilities of a company, or it is calculated by subtracting cuiTent assets from current liabilities (Hoang, T. The management of working capital plays a critical role in a company's capacity to effectively use its short-term assets for the purpose of fulfilling short-term liabilities. Given its direct and substantial impact, the utilization and management of working capital exert a notable influence on the overall business performance of enterprises across various industries, encompassing both short term and long-term effect, as well as spanning all areas of specialization and operational procedures of businesses (Soukhakian & Khodakarami, 2019). “Working capital management involves planning and controlling current assets and current liabilities in a manner that eliminates the risk of inability to meet due short term obligations on the one hand and avoid excessive investment in these assets on the other hand" (Eljelly, 2004).
Working capital management not only reflects a company's current financial standing but also serves as an indicator of its overall performance. Recognizing the significance of working capital in supporting business operations, managers strive to utilize it efficiently. The significance and indispensability of proficient working capital management have led to the conduction of empirical studies, yielding valuable insights. Nevertheless, the current research landscape on this subject remains insufficient in terms of its coverage across diverse business sectors and economic markets in various countries.
Most previous studies published have typically examined a range of industries, including companies or public corporations within a country, with only a few studies focusing on a specific industry or sector. In order to specialize and provide a more specific perspective, this research article focuses on listed manufacturing companies in Vietnam Stock Markets. By narrowing the scope to a specific group of companies, the study aims to provide a more focused and in-depth analysis within the manufacturing sector. The effectiveness of working capital management is particularly crucial for 3 manufacturing companies, where a significant portion of assets consists of current assets.
There are several reasons for the importance of working capital management, especially for manufacturing companies. For a typical manufacturing enterprise, current assets account for more than half of its total assets (Dong, H. Both excessively high and low levels of working capital can have negative effects on the smooth operation of a business. With this perspective and the increasing recognition of the potential contribution of the manufacturing sector to the economies of developing countries, this study will strive to provide insights into the impact of working capital management on the profitability of listed manufacturing enterprises on the Ho Chi Minh Stock Exchange.
Consequently, this research was undertaken and developed with the aim of offering insights derived from the Vietnamese market, thereby contributing to the existing source of reference materials available to domestic businesses. Especially, profitability stands as a crucial objective pursued by all businesses, garnering constant attention and aspiration. The correlation between working capital management and profitability has consistently captivated diverse objects. Consequently, the research topic, "The effect of Working Capital Management on the Profitability of Manufacturing Companies Listed in Vietnam Stock Markets" emerges as a pertinent and indispensable subject, offering practical reference value to enterprises.
Research objectives The main purpose of this research is to explore and identify the relationship between working capital management (WCM) and the profitability of manufacturing businesses in the Vietnamese market. Il aims to contribute a small part to the reference materials for analysts and enterprises by providing insights and proposing effective financial management strategies for businesses. This research seeks to shed light on the impact of different working capital management strategies on the profitability of manufacturing companies. By examining key financial indicators, such as average customer average receivable period (ARP), average inventory period (AIP), and average payables period (APP), and cash conversion cycle (CCC), the article aims to identify the optimal levels of working capital that can maximize profitability of manufacturing companies in the Vietnamese market context.
Subject and Scope 4 Research object: The relationship between working capital management and profitability of manufacturing enterprises in Vietnam. Research scope: The population of this research includes all the manufacturing firms listed on Ho Chi Minh Stock Exchange (HOSE) and Ha Noi Stock Exchange (HNX). Data samples were collected from FiinGroup (formerly Stoxplus) through the annual reports, the management reports, the annual audited financial statements of 171 manufacturing enterprises during a period 2008 - 2019 with totally 2052 observations. Research questions This research will analyze and address the following questions: • What is the current status of working capital management practices among manufacturing enterprises in the Vietnamese market? • What is the relationship between working capital management and the profitability of manufacturing businesses in Vietnam? 1.
Research contributions Working capital management plays a critical role in the financial management of businesses and can have a significant impact on their operations, particularly during times of financial crisis. In such challenging times, companies often face various obstacles, including reduced access to credit, declining sales, and increased uncertainty in the business environment. Efficient management of working capital becomes crucial as it directly affects a company's short-term assets, short-term liabilities, revenue, and operating costs. Working capital management can have a significant impact on the operations of companies during financial crises (Akgiin and Karatas, 2020; Baveld, 2012), as it affects short-term assets, short-term liabilities, revenue, and operating costs (Zimon and Ankiewicz, 2020).
Recognizing its importance, this study aims to provide further insights into the existing literature on working capital management, specifically the methodology and the impact of its components on the return on investment of manufacturing companies in Vietnam. The core value of this research is to identify the relationship and negative impact of working capital management on the profitability of manufacturing companies in Vietnam. In which, WCM variables include: average 5 customer receivable period (ARP), average inventory period (AIP), and average payables period (APP), and cash conversion cycle (CCC). Based on the research findings, businesses can draw implications to establish working capital management policies in their operations.
By analyzing the impact of each component variable, businesses can identify real issues, assess the importance of each factor, and determine suitable working capital management strategies. Moreover, the research provides valuable insights for businesses to establish robust working capital management policies and improve their overall financial performance. Structure The research is structured into five chapters, along with the respective sections and reference materials: • Chapter 1: Introduction: Introducing to the research purpose, topic context, subject, scope, and significance of the research; • Chapter 2: Theoretical Framework: Discussing relevant concepts, theoretical foundations and hypotheses; • Chapter 3: Research Methodology: Presenting and analyzing variables, model and research methods; • Chapter 4: Analysis and Research Findings: Analyzing research findings and providing observations; • Chapter 5: Conclusion and Policy Implications: Providing final conclusions and offering recommendations and practical suggestions. Working Capital Working capital, often known as the total amount of money used by a firm to pay for all of its short-term assets for use in production and business operations, is the total amount of money that a firm spends to make purchases, establishing current assets to support its operations at a specific time (Brealey et al.
This capital usually circulates at one lime and is fully recovered, completing a circulation cycle at the end of a business cycle. Working Capital Management Working capital management is the management of a business’s short-term assets (Paramasivan and Subramanian, 2008), involving decision-making about the quantity and composition of current assets as well as the financing of these assets. In other words, this is the process of building and implementing working capital policies in business activities to ensure that the enterprise is able to maintain liquidity, fully meet short-term obligations while ensuring that the company’s assets are invested in the most efficient way. Working capital management policies vary depending on profitability levels and risk appetites, so managers need to consider the trade-off between profitability and expected risk before making decision about an optimal working capital level.
Working capital management plays a key role in production and business activities to bring operational efficiency to the enterprise. Working capital in firms includes capital in the form of inventory, accounts receivable, accounts payable,. This research will focus on 4 aspects of working capital management: - Accounts Receivable Management: There are many types of receivables in companies, including customer receivables, prepayments to sellers, internal receivables, deductible value-added tax receivables, and other receivables. In particular, accounts receivable from customers often account for the largest proportion.
The existence of receivables in a business is objective, but whether the level of receivables is high or low also depends on the subjective factor of the corporate management.