Efficient working capital management, financial constraints and firm value: a text-based analysis

Sandip Dhole, Sagarika Mishra, Ananda Mohan Pal

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17 Citations (Scopus)


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.

Original languageEnglish
Article number101212
Number of pages19
JournalPacific Basin Finance Journal
Publication statusPublished - Dec 2019


  • Analyst target Price
  • Financial constraints
  • Future stock Price
  • Working capital management

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