191022 diss hw.docx - Impact of working capital management...

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Impact of working capital management on firm performance of recently listed enterprises in Vietnam I. Literature Review It is proven by many empirical studies that there are multiple factors affecting firm performance, one of which being working capital management. Working capital is a measurement of both firm liquidity and efficiency, and is defined as the difference between current assets and current liabilities: Working Capital = Current Assets – Current Liabilities Most empirical researches conclude that working capital management has a significant impact on firm’s profitability; however, the specific relationship between these two factors can vary from market to market. In some studies, there was a positive correlation between working capital management and firm performance. Using four measures to represent working capital management – days of inventory outstanding (DIO), days of sales outstanding (DSO), cash conversion cycle (CCC), and days of payables outstanding (DPO), Asaduzzaman and Chowdhury (2014) found that 3 out of the 4 measures indicated a positive relation between working capital management and firm performance. Moreover, using data from Ghanaian
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