Significant Financing Efficiency Operational Working Capital Management And Corporate Performance

Working capital management is an important content of enterprise financial management. Sensational liquidity can make production and operation activities smoothly and avoid the possibility of bankruptcy due to inability to repay short-term debt. Reasonable liquidity of arrangements is very important to enterprise financial management. However, our study on working capital management started late and working capital management has not received enough attention. Currently there are more studies on the relationship between the policy of working capital management and corporate performance, and the study on the relationship between working capital management and corporate performance is relatively less. From the research results, the scholars usually use cash cycle as an indicator of efficient working capital management, showing a significant positive correlation between the working capital management efficiency and corporate performance. However, studies on the relationship between working capital management and corporate performance have basically confined within the field of business activities, and less involved in the scope of the three financial activities(long-term financing decisions, long-term investment decisions and working capital management). Since the IASB and FASB jointly issued a discussion paper about "preliminary opinion on the financial statement presentation", proposing to divide business activities into operating activities and financial activities, the concept of operating working capital gradually clear up. Because of these aspects, this article will explore the relationship between the efficiency of operational working capital management and corporate performance on the basis of making a distinction between operational working capital and working capital, and taking significant financing into consideration.The introduction of this paper describes the background and significance of the study. Previous studies showed that working capital management have a positive impact on business performance, but whether the impact still work if the company make a significant financing? It has instructive significance for the working capital management and corporate performance management. Then it points out the idea, method and framework of the paper. In literature review section, the paper reviewed related domestic and foreign literature on working capital management and corporate performance systematically, including the analysis of the working capital management, the search for corporate performance, as well as the theoretical and empirical research results between them. Then the paper defines the concept of working capital management and corporate performance management, at the same time overviews the related theories, such as the principal-agent theory, Information asymmetry theory and stakeholder theory. And then it analyzes the mechanism of action between them. The fourth part of the paper putted forward the research hypothesis based on the theoretical analysis about the correlation between working capital management and corporate performance management. And the research hypothesis are what the relationship between working capital management and corporate performance management on the general business conditions and the significant financing conditions. To test the hypotheses, the fifth part of the paper selects relative data of the listed companies during 2008-2013 in China’s Shanghai and Shenzhen Stock Exchange as the research sample, applying different models on sub-samples and mixed samples. Finally the paper uses descriptive statistics, correlation test and multiple regression model analysis to investigate the correlation between working capital management and corporate performance management on different conditions. And the paper selects manufacturing and retail as sub-samples to make a comparison. In order to guarantee the robustness of the test results, the paper will replace the corporate performance index, the results of the analysis and the main test results will consistent. According to the research conclusion in the end, this paper puts forward the relevant policy recommendations, such as strengthening working capital management, formulating a reasonable financing policy, strengthening market supervision and so on. In the epilogue part, the paper explains the research limitations and deficiencies, and puts forward the prospect for the further research.In this paper, the empirical results show that there is a significant positive correlation between the efficiency of operational working capital management and business performance on the general business conditions, but they have no significant correlation on the significant financing conditions. The main reason is that companies always manage operating working capital actively by accelerating the collection, accelerating inventory turnover and deferring payment to minimize the cost of capital and improve business performance when it is on general business condition. While company prefer to meet the operating working capital needs once they get huge amounts of money through significant financing, what makes the decline of the efficiency of working capital management and the weakness of its influence. In addition, the remaining funds are often difficult to be used on long-term investment, resulting in damages to corporate performance, and ultimately weakening the influence the operating working capital management makes. Based on the accuracy of the results, this paper also considers the influence of control variables, the lower financial leverage, the greater scale of listed companies, and the better growth, the corporate performance will be better, which finely meets company’s business purpose that to be bigger and stronger.