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The Impact of Working Capital Management on Cash Holdings: A Quantitative Study of Swedish Manufacturing SMEs
Mid Sweden University, Faculty of Human Sciences, Department of Social Sciences.
2008 (English)Independent thesis Advanced level (degree of Magister), 40 poäng / 60 hpStudent thesis
Abstract [en]

This study examines the impact of working capital management on cash holdings of small and medium-sized manufacturing enterprises in Sweden. The aim of this work is to theoretically derive significant factors related to working capital management which have an influence on the cash level of SMEs and test these in a large sample of Swedish manufacturing SMEs. The theoretical framework for this study consists of a treatise of motives for holding cash, working capital management and cash level. From these theoretical findings, two hypotheses are deduced:

• H1: Cash holdings are negatively related to the presence of cash substitutes

• H2: Cash holdings are positively related to working capital management efficiency

The quantitative investigation consists of the statistical analysis – namely comparison of means and correlation analysis – of key figures which are calculated from the financial statements of a large sample of firms. The dataset contains 13,287 Swedish manufacturing SMEs of the legal form ‘Aktiebolag’. Both hypotheses are confirmed by the results. Empirical evidence is presented which substantiates the supposition that the presence of cash substitutes – namely inventory and accounts receivable – entails lower cash holdings. Furthermore, it is confirmed that working capital management efficiency – measured by the cash conversion cycle – is positively related to cash level. The discussion of the empirical findings pays regard to the different subordinate components of both cash substitutes and working capital management efficiency. Implications of the detected findings are highlighted with respect to their potential utility for the achievement and maintenance of a firm’s target cash level.

Place, publisher, year, edition, pages
Institutionen för samhällsvetenskap , 2008. , 84 p.
Keyword [en]
Working Capital Management, SME, Cash Holdings, Cash substitute, Cash conversion
National Category
Business Administration
Identifiers
URN: urn:nbn:se:miun:diva-243OAI: oai:DiVA.org:miun-243DiVA: diva2:1530
Presentation
2008-06-02, 1322, G, Kunskapens väg 8, Östersund, 08:00
Uppsok
samhälle/juridik
Supervisors
Examiners
Available from: 2008-06-17 Created: 2008-06-17Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf