DETERMINANTS OF WORKING CAPITAL MANAGEMENT: CASE STUDY OF LISTED COMPANIES IN ASEAN

Abstract

Every organization, regardless of its size and nature of business, requires a certain amount of working capital. Though it may seem simple, managing working capital is crucial for a company's sustainability. If not managed properly, poor working capital can lead to deteriorating liquidity and bankruptcy. Working Capital Management (WCM) involves making decisions regarding the amount and proportion of current assets and financing structure over the assets. Managers are required to have the ability to plan and control capital to prevent shortages or excess funds. However, the implementation of policies and decision making carried out by managers is not always based on reasons to improve WCM efficiency alone. Managers have the potential for opportunistic management motivation. One of them is through the practice of Earnings Management. There are many factors that influence working capital management. However, the factors used in this study are earnings management, return on asset, operating cash flow, leverage, firm growth, firm size, and working capital accruals. Meanwhile, WCM is reflected by the cash conversion cycle (CCC). By taking samples from listed companies in Indonesia, Malaysia, Singapore, the Philippines and Thailand for the period 2003-2022, it was found that there was a significant positive influence from earnings management and working capital accruals on WCM. Profitability, operating cash flow, leverage, and firm growth have a significant negative effect on WCM. Meanwhile, firm size shows an insignificant influence.