Open Access Journal
    • INTERNATIONAL CONFERENCE ON HUMANITIES, LITERATURE AND ECONOMICS (ICHLE 2014) Jan. 1-2, 2014 Bangkok (Thailand) Bangkok, Thailand
    • 2014 3rd International Conference on Climate Change and Humanity - ICCCH 2014 Melbourne, Australia
    • 2014 ISIS MIAMI BEACH INTERNATIONAL MULTIDISCIPLINARY ACADEMIC CONFERENCE - Promoting Global Progress and Excellence in Academia MIAMI BEACH, United States of America
    • 2014 3rd International Conference on Economics Marketing and Management - ICEMM 2014 Toronto, Canada
    • IACD-2014 (Dubai) International Academic Conference Dubai, United Arab Emirates
    • Hot Legal Issues In Higher Ed: Understanding Laws, Rules & Regulations for College Administrators online, United States of America
    • Association of Proposal Management Professionals
    • Corporate Portfolio Management Association
    • Destination Marketing Association International
    • International Association for Business and Society
    • International Association of Assembly Managers
    • Professional Convention Management Association
    • Religious Conference Management Association
    • Society of Inventory Management Benchmarking Association
    • Society of Government Meeting Professionals


© International Journal of Management, Economics and Social Sciences
2013, Vol. 2(4), pp. 233 – 251.
ISSN 2304 – 1366


Working Capital Management and Financing Decision: Synergetic Effect on Corporate Profitability


Solabomi O. Ajibolade

Oboh Collins Sankay
Dept. of Accounting, University of Lagos, Nigeria


Persuaded by the pecking order assumptions, where internal fund is preferred over debt and equity when financing investment projects, this study provided empirical evidence on the interaction between working capital management and corporate debt structure, and the effect of this on corporate profitability. The assumption on which the study was based is that, if internal funds become the preferred source of finance for investment projects, then working capital composition is interfered, making both decisions co-dependent. A pool of time-series and cross-sectional dataset was constructed from the annual audited financial results of 35 manufacturing companies listed on the Nigerian stock exchange for a two-year period (2011 - 2012). Panel exploration and Factorial-ANOVA estimation techniques were used to estimate the econometric models developed for the study. The results suggested a significant negative relationship between firm's working capital composition and their debt structure choice. Additionally, on individual basis, the study found a positive significant relationship between debt structure and profitability but no significant relationship between firm's working capital composition and profitability. The results, however, showed that as the firm's working capital composition synchronously interacts with the debt structure, corporate profitability is positively affected. The study therefore recommends that, for firms to optimize profitability and to maintain good liquidity position, corporate financing decision should be considered side by side with their working capital composition.

Keywords: Pecking-order assumptions, working capital composition, debt structure choice, profitability
JEL: O16, E22, G32



HomeScopePolicyPress RoomContact Us

Copyrights © 2012-2015 IJMESS® Int'l. (All Rights Reserved)