by Saheed. A. Nurein*, Salleh. Hj. Din, Suberi Ab. Halim

Universiti Malaysia Perlis, Malaysia

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Abstract

Despite the acknowledgement and evidence from extant studies that working capital management has influence on firm value there is argument that this relationship is subject to the external environment, internal resources and management decisions of the firm as anticipated by contingency theory. As such, this study aim to examine whether the relationship between working capital management and firm value is moderated by the contingency factors as proxied by competitive intensity, R&D investments, and independent non-executive directors. The sample of 299 non-financial firms listed on the main market of Bursa Malaysia for the period 2006-2015 were applied. By applying Pearson’s correlation and panel data approach through fixed effects regression estimation, the main findings showed that the influence of working capital management on firm is significantly moderated by the interaction of firms’ contingency variables. This study suggests that aligning working capital management policies toward the environment, internal resources and management decisions can minimize the costs and maximize the advantages of working capital investment because any misalignment might affect the firm value significantly.

Keywords: Working capital, firm value, contingency variables, Malaysia firms

Updated:: 21/02/2022 [syazmer]