Do Working Capital Strategies Matter? Evidence from Small Business Data in Japan | Zendy

Tsuruta Daisuke | Zendy

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Do Working Capital Strategies Matter? Evidence from Small Business Data in Japan

Author(s) -

Tsuruta Daisuke

Publication year - 2018

Publication title -

asia‐pacific journal of financial studies

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.375

H-Index - 15

eISSN - 2041-6156

pISSN - 2041-9945

DOI - 10.1111/ajfs.12239

Subject(s) - working capital , business , capital (architecture) , monetary economics , demographic economics , economics , finance , archaeology , history

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.

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