How Does Investment in Working Capital Effect the Probability of Manufacturing Companies at Indonesian Stock Exchange?

Isni Andriana, Yuliani, K.M. Husni Thamrin, Taufik Saggaff

2018

Abstract

Purpose – The purpose of this paper is to investigate the effect of investment in working i.e cash conversion cycleand control variables i.e. current ratio, firm growth and leverage to firm profitability for a sample of 51 of manufacturing companies in Indonesian stock exchange. In addition, this paper also tries to find the break event point of cash conversion cycle and profitability. Design/methodology/approach – The study is based on secondary financial data obtained from Indonesian capital market directory from 2014 to 2017.Multiple linier regression was applied to knowthe effect of cash conversion cycle, current ratio, firm growth and leverage to profitability. Findings – The findings indicate that cash conversion cycle, current ratio positively influence profitability, meanwhile, firm growth and leverage do not effect profitability. The results also confirm the inverted U-shape relationship between cash conversion cycle and profitability. The break event point of cash conversion cycle is 66 days. Originality/value– To best of our knowledge this research is a preliminary attempt contributing to the literature by providingevidence for an inverted U-shaped relation between working capital investment and profitability of manufacturing companies at the Indonesian stock exchange. Research limitations – This research only focuses on manufacturing sector companies. For further research, it is recommended to observe all companies sectors in the Indonesian stock exchange and add other relevant variables. Practical implications -The findings have implication for management of manufacturing companies at the Indonesian stock exchange.to pay attention to investment efficiency in working capital.

Paper Citation

in Harvard Style

Andriana I., Yuliani., Thamrin K. and Saggaff T. (2018). How Does Investment in Working Capital Effect the Probability of Manufacturing Companies at Indonesian Stock Exchange?.In Proceedings of the 4th Sriwijaya Economics, Accounting, and Business Conference - Volume 1: SEABC, ISBN 978-989-758-387-2, pages 516-524. DOI: 10.5220/0008442005160524

in Bibtex Style

@conference{seabc18,
author={Isni Andriana and Yuliani and K.M. Husni Thamrin and Taufik Saggaff},
title={How Does Investment in Working Capital Effect the Probability of Manufacturing Companies at Indonesian Stock Exchange?},
booktitle={Proceedings of the 4th Sriwijaya Economics, Accounting, and Business Conference - Volume 1: SEABC,},
year={2018},
pages={516-524},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0008442005160524},
isbn={978-989-758-387-2},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 4th Sriwijaya Economics, Accounting, and Business Conference - Volume 1: SEABC,
TI - How Does Investment in Working Capital Effect the Probability of Manufacturing Companies at Indonesian Stock Exchange?
SN - 978-989-758-387-2
AU - Andriana I.
AU - Yuliani.
AU - Thamrin K.
AU - Saggaff T.
PY - 2018
SP - 516
EP - 524
DO - 10.5220/0008442005160524