Effects of Working Capital Management Policies on Shareholders’ Value: Evidence from Listed Manufacturing Firms in Ghana
This study has sought to determine the effects of working capital management policies on shareholder value creation for six manufacturing firms listed at the Ghana Stock Exchange for the period of 2000–2013. Data were gathered from the annual reports of the firms and the publication of Ghana Stock Exchange. The study employed a longitudinal explanatory non-experimental research design applied to a dynamic panel Autoregressive Distributed Lags methodology framework for analysing the data. The results indicated that conservative current asset investment policies increase economic value added (EVA), whereas aggressive current asset investment policies enhance market-to-book ratio and Tobin’s Q in the long-run. On the other hand, conservative current asset financing policies enhance market-to-book ratio, Tobin’s Q, and EVA in the long-run. Thus, investors discount aggressive current assets’ financing policies. A firm pursuing an aggressive current asset investment policy should balance it with a conservative current asset financing policy to create value for its shareholders.
Keywords: Current asset investment policy, Current asset financing policy, Panel unit root, Panel ARDL, Shareholder value.
JEL: G30, G31, G32.