They found that firms before the crisis, with high short term debt, extend significant trade credit. This means that if a firm pays within 10 days it receives a discount of 2 percent, if not, the total bill has to be paid in thirty days. That large firms without bond ratings increase their use of trade credit is supported by the findings of Yang There is a source of funds which is often neglected by companies, which is working capital. Garcia-Teruel and Martinez-Solano found a somewhat smaller percentage of

In this literature, there is a long debate between the risk and return of the different working capital policies Pinches, ; Brigham and Ehrhardt, ; Moyer et al. This is not used, to my knowledge, in other studies on working capital management. Mathias Bernard Baveld Student Number: As can be seen in the table only the number of days accounts receivables during the crisis period is statistically different from the non- crisis period. So the longer the cycle is the higher will be the investment in the working capital. Many authors like Shin and Soenen have argued that it is important for firms to shorten the CCC, as managers can create value for their shareholders by reducing the cycle to a reasonable minimum Sharma and Kumar, Later, the results of the most influential articles on trade credit motives are discussed.

So the longer the cycle is the higher will be the investment in the working capital. Raheman and Nasr did research in Pakistan and provided more evidence for the negative relation between profitability and the CCC, which is the measure for working capital management efficiency in this study.


The level of WCM is measured with the cash conversion cycle.

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The firms are divided in three sectors, which are Manufacturing, Information and Communication and Other Sectors. Deloof did research in Belgium after the relation between working capital management and firm profitability.

Accounting and Finance, 50 The method that was used is the OLS regression analysis, in which the number of days accounts receivables, accounts payables, inventories and the cash conversion cycle are analysed. The question of whether these restrictions are also implemented during the financial crisis ofis studied by Ivashina and Scharfstein Essentials of Financial Management.

Crisis Period The results of the regression analyses studying the relation between inventories and profitability during the crisis period is represented in the tables 4. The first type uses the natural logarithm of assets to determine the size of a firm.

Utdente because cutting any cost during a crisis is very important, even for larger firms, to survive the turbulent times of a crisis. Xiaohong Huang for their support and valuable advices given to me in the making of this thesis.

They found evidence utwentd a positive relation, which means that loosening the three parts utwentf a firm working capital management leads to higher profit. Later, each variable is discussed and what variables are used by various authors and why and how they are operationalized. The negative side of granting trade credit and keeping inventories is that money is locked up in working capital Deloof, According to Deloof fixed financial assets are shares in other firms.

Garcia-Ternuel and Martinez- Solano, To enhance robustness of this study this control variable will also be used in the upcoming analyses. Descriptive statistics Table 4.


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Technological tbesis, like longer setup and processing times increases the level of inventories. It could imply that certain firms should not minimize their accounts receivables during crisis periods, but since there is no significant relation this cannot be concluded.

Matching results was found by Excellenr et al. This explanation is supported by masger findings of Calomiris et al. The second reason is demand driven, i. First of off all I am very grateful to my supervisors at the University of Twente, Prof. But this policy is criticised by Wang A comparable finding of 44,48 days is found by Deloof There are several reasons for this expectation. The working capital policies during the non-crisis period of and during the Financial Crisis of and are compared.

For larger firms such a need for substitution does not exist, and therefore has a different effect on the profitability of larger firms.

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This implies that for relatively large public listed firms the policy concerning accounts receivables needs to be altered during a crisis period. None of the tables showed a significant relation. Working Capital Management and Corporate Profitability: Giving these credit terms to customers are an utwwente way of securing sales Berry and Jarvis,

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