TY - JOUR
T1 - Efficient working capital management, financial constraints and firm value
T2 - a text-based analysis
AU - Dhole, Sandip
AU - Mishra, Sagarika
AU - Pal, Ananda Mohan
PY - 2019/12
Y1 - 2019/12
N2 - In this paper we examine the association between efficient working capital management and financial constraints for a sample of Australian firms. Using a text-based measure of financial constraints, we show that efficient working capital management is associated with lower financial constraints in firms in the next two to three years. Ours is the first study to use a text-based measure of financial constraints for Australian firms. We also show that the negative association between financial constraints and future share price is significantly weakened for firms with efficient working capital management, suggesting that such firms have higher market valuations despite being financially constrained. Finally, analysts seem take into account working capital management of firms when setting the one year ahead target price.
AB - In this paper we examine the association between efficient working capital management and financial constraints for a sample of Australian firms. Using a text-based measure of financial constraints, we show that efficient working capital management is associated with lower financial constraints in firms in the next two to three years. Ours is the first study to use a text-based measure of financial constraints for Australian firms. We also show that the negative association between financial constraints and future share price is significantly weakened for firms with efficient working capital management, suggesting that such firms have higher market valuations despite being financially constrained. Finally, analysts seem take into account working capital management of firms when setting the one year ahead target price.
KW - Analyst target Price
KW - Financial constraints
KW - Future stock Price
KW - Working capital management
UR - http://www.scopus.com/inward/record.url?scp=85074425454&partnerID=8YFLogxK
U2 - 10.1016/j.pacfin.2019.101212
DO - 10.1016/j.pacfin.2019.101212
M3 - Article
AN - SCOPUS:85074425454
SN - 0927-538X
VL - 58
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
M1 - 101212
ER -