Do Working Capital Strategies Matter? Evidence from Small Business Data in Japan1. (16th December 2018)

• Record Type: Journal Article
• Authors: Tsuruta, Daisuke
• Is Part Of: Asia-Pacific journal of financial studies. Volume 47:Number 6(2018:Dec.)
• Page Start: 824
• Page End: 857
• Publication Date: 2018-12-16
• Subjects: Working capital -- Firm performance -- Trade credit -- Inventory -- Small businesses; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12239
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: Previous studies show that a high level of working capital is harmful to firm performance. Using data from over 100, 000 small businesses in Japan, we show that a high level of working capital has a positive effect on default risk and sales growth. Therefore, this activity has both positive and negative effects. Additionally, the relationship between working capital and firm performance is negative over a 1‐year period, but positive over longer periods, implying that a high level of working capital is ultimately not harmful for small businesses.