The effect of working capital management on the profitability of manufacturing companies listed on viet nam stock exchange

Abstract

This study aims to investigate the relationship between working capital management and profitability of manufacturing companies. The data was collected and aggregated based on the audited financial reports of 171 listed manufacturing companies on the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) over a period of 12 years (from 2008 to 2019). With the assistance of specialized software Stata, the results show a negative relationship between average customer receivable period (ARP), average inventory period (AIP), average payables period (APP), and cash conversion cycle (CCC) with profitability. Therefore, managers can enhance the company's profitability by reducing the cash conversion cycle, net operating cycle, and its components to an optimal level. Furthermore, controlling variables including liquidity, leverage, company size, and company growth also have a significant impact on profitability. These findings contribute to improving financial management efficiency for businesses and provide additional reference materials for the Vietnamese market