Impact of Working Capital Management on Corporate Investments: Evidence from Sri Lankan Manufacturing Sector

Abstract

The study examines the value effect of working capital management (WCM) for a sample of 28 Sri Lankan manufacturing firms from 2010 to 2015. Previous studies on Sri Lankan manufacturing firms have primarily focused only on net working capital and firm profitability whereas the current research attempts to extend it by providing evidence that corporate investment is a possible method through which efficient management of working capital can be translated into better firm performance. For this purpose, panel data methodology is used to measure the relationship between corporate investment and net working capital. The findings indicate that operating performance of a firm can be improved by utilizing the net working capital through channeling it on corporate investment.

Keywords: Working capital management, Investment, Performance