The Determinants of Working Capital Management: Evidence from European Companies

DOI: 10.5176/2251-1997_AF14.35

Authors: Sasithorn Supatanakornkij

Abstract:

Given the lack of comparative international empirical research on working capital management (WCM), this paper investigates the key determinants of WCM using a panel data set of listed companies in 12 European countries over a period from 2000 to 2007. Empirical results reveal that they are a firm’s access to external financing and ability to generate internal financing that play a key role in a firm’s WCM. The extent of investment in fixed assets and profitability are additional factors correlated with a firm’s WCM. The analyses undertaken also show that European variations in WCM are due to both the direct and indirect country effects that also impact firm-specific determinants.

Keywords: working capital management, determinants of working capital management, cross-national analysis