Introduction
Introduction
Introduction
Corporate financial management deals with basic three decisions for the purpose to get
firm financial goals. These decision consist on capital budgeting, capital structure and
working capital management .As postulated by firer et al (2008), the three core area of
corporate finance are 1st one, capital budgeting, which deal with long term investments
of the firm 2nd one, Capital structure, which deal with debt and equity finance of the firm
and 3rd one, working capital management, which deals with current assets and
liabilities of the firm. Among these factors Working capital management is considers one
liabilities of the firm .The inventory ,account receivables and cash are consider current
assets and account payable and short term dues are consider current liabilities.
inventory ,account receivables ,cash and current liabilities consist on account payable
and sort –term borrowing. Further, Working capital management is simply the
management of firm's current assets and current liabilities at most favorable level. The
conducted by Nazir and Afza (2009), the main purpose of working capital management
is to keep the current assets and current liabilities an optimal level. According
Filbeck and Krueger (2005), the aim of working capital management is to hold an
Optimum balance of each of working capital. The main objective of working capital
management is to keep the current assets and current liabilities at most favorable level
(Gill,2011).
According to Filbeck and Krueger (2005) Nazir and Afza (2009), and Gill (2011) the
capital at most favorable level. Reference to the above statements the firm should
maintain the amount of current assets and current liabilities an optimal level.
Here an optimal level means that the element of working capital should not increase
neither decrease than the requirements, because both levels of working capital may
harmful to the business. Decreasing account receivable referring that company has
limited credit sale which ultimately effects on profitability. Decreasing the inventory of a
firm may lose demand of the customers and hence the cause of reducing the revenue of
the business. Similarly, too much cash can cause of mismanagement and idle cash thus
2012), to decreasing accounts receivable, a firm may lesser credit sales which lead to
lost sales thus reducing the profit and to minimizing inventory may lead to lost sales by
capital on the continuous base. Because the only optimal level of working capital can
add values in the business day to day activities. Deloof in his paper (2003), the firm
should try to keep an optimal level of working capital that maximizes their value.
management of a company should have to keep an eye on those factors which effect
the optimal level of working capital .There are certain internal and external factors that
effect on the optimal level of working capital. Factors that affect working capital
management, Payable management, and Firm size (Chaudhry & Ahmad,2015). These
factors can effect working capital management by different dimension. Among these
factors, the corporate governance is very important factors that impact on working
capital management.
companies are directed and controlled”. According to the Australian standard (2003),
and controlled. Corporate governance is the process, structure, and mechanism which
ensure value for the firm shareholders and enhance the performance of firm through
found that Good corporate governance practices are important in reducing the risk for
business is the key for national economic development. In his study, Gomez (2005)
noted, “if enterprise businesses do not prosper, they will stagnant and collapse. If
there must have proper governance for manufacturing business in country. In context,
the manufacturing firms need the better level of working capital managements through
corporate governance practices to achieve goals of business. Finally the study will be
examined about corporate governance and its impact on working capital management
of manufacturing firm.
PROBLEM STATEMENT:
Working capital management is an important factor for the firm, especially for
management is vital specially for manufacturing firm, where the major part of assets and
liabilities consist on current assets and current liabilities. Similarly working capital
Mukhopadhyay (2004), working capital management viewed as life blood for any
economic unit and its management is consider among the most important function of
for national economic development, because corporate businesses are the key factors
for economic growth and development. In order to get investor confidence in the
economy like to other developed countries, the need for good corporate governance in
important area of research in Pakistan. Cheema, et al. (2003), suggests that corporate
governance can play a significant role for Pakistan to attract foreign investment and
mobilize greater saving through capital provided the corporate governance system is
compatible with the objective of raising external equity capital through capital markets.
company performance in Pakistan but many issues in this area are uncovered. In
particularly the impact of corporate governance on working capital management
specially of manufacturing firm is the central issue in this area which needs in-depth
research.
Research question:
Main question:
firm in Pakistan; Mean’s that, are corporate governance variables statistically significant
Sub questions:
1) Is there is any significant relationship between board size and working capital
management?
2) Is there is any significant relationship between board meeting and working capital
management?
capital management?
2) If statistically significant value, what is the direction of each variable; Mean’s that is
hypothesis :
The objective of the study consists on general objective and specific objective:
General objective:
The main objective of the study is to determine the impact of corporate governance
Specific objective:
manufacturing in Pakistan.
manufacturing in Pakistan
manufacturing in Pakistan.
Purpose of the study:
The purpose of the study is to find out the relationship between corporate
Pakistan over the time span 2010 to 2014. For this purpose the relationship
1) The relationship between board size and working capital management of the
firm.
the firm.
of the firm.
Justification:
vital component of the industrial sector containing 65.4 percent contribution in the
overall industrial sector and GDP share is 13.3 percent. As an important sector in
the overall economic growth, manufacturing sector required in depth analysis at firm
level.
Working capital management considering the most important ingredient for
management is vital especially for manufacturing firms, where large part of assets
The majority of previous research that had been conducted on working capital
management with relation to firm performance and profitability ,but not much on how
study. Therefore, this study will focus on corporate governance and its impact on
This study will not only beneficial for corporate sector of Pakistan but it will also
contribute for other developing countries in East Asia. This study will also contribute
management.
Scope:
The study range will only limit to manufacturing firms in Pakistan. The sample size is
firms. Since the sample of working capital management and corporate governance
manufacturing firms. Similarly the sample collection period range of the study will be
limited to 2010 - 2014. For data collection the researcher will use financial statement
Due to time limitation the study is unable to measures more variables of corporate
governance and working capital management, but only limited to measure the main
management. The quantitative study will be used to measure these variables with