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Working Capital Management and Shareholder WealthRobert L. KieschnickUniversity of Texas at Dallas Mark Laplanteaffiliation not provided to SSRN Rabih MoussawiUniversity of Pennsylvania - The Wharton School April 27, 2012 Abstract: We provide the first empirical study of the relationship between corporate working capital management and shareholder wealth. Examining U.S. corporations from 1990 through 2006, we find evidence that: the incremental dollar invested in net operating working capital is worth less than the incremental dollar held in cash for the average firm; the valuation of the incremental dollar invested in net operating working capital is significantly influenced by a firm’s future sales expectations, its debt load, its financial constraints, and its bankruptcy risk; and the value of the incremental dollar extended in credit to one’s customers has a greater effect on shareholder wealth than the incremental dollar invested in inventories for the average firm.
Number of Pages in PDF File: 31 Keywords: working capital, financing, shareholder wealth JEL Classification: G31, G34 working papers seriesDate posted: April 10, 2011 ; Last revised: November 25, 2012Suggested CitationContact Information
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