This paper examines the linkage between working capital management and corporate performance for a sample of non-financial UK companies. In contrast to previous studies, the findings provide strong ...support for an inverted U-shaped relation between investment in working capital and firm performance, which implies the existence of an optimal level of investment in working capital that balances costs and benefits and maximizes a firm's value. The results suggest that managers should avoid negative effects on firm performance because of lost sales and lost discounts for early payments or additional financing expenses. The paper also analyzes whether the optimal working capital level is sensitive to alternative measures of financial constraints. The findings show that this optimum is lower for firms more likely to be financially constrained.
This paper studies the effect of growth opportunities, financial constraints and financial distress on the speed of adjustment of small and medium-sized enterprises (SMEs) to their target cash ...holdings. We use a sample of Spanish SMEs from the period of 1998 to 2012. The results support the existence of a target cash holding level to which small firms attempt to converge. Additionally, consistent with the precautionary motive for cash holdings, the results show that SMEs with greater growth opportunities adjust more quickly to their target cash holding level to preserve their financial flexibility and to be able to take advantage of profitable investment opportunities when they arise. Moreover, for SMEs in financial difficulties, the adjustment speed of cash is higher to avoid financial distress costs. Finally, we observe a faster speed of adjustment for cash holding in the crisis period for all firms, as a possible response to the credit restrictions faced by SMEs.
The energy required for various processes in the water cycle can have significant economic and environmental impacts. Therefore, efficient energy management in urban water supply systems is crucial ...for a sustainable operation. By installing energy recovery technologies in these facilities, it is possible to reap the benefits of the infrastructure design by saving energy. In this study, a new methodology to assess the energy recovery at the inlets of district metered areas is presented, considering the city of Murcia (Spain) as case study. This methodology is based on creating a detailed model of city water supply system and calibrating such model with an experimental campaign of measurements. Then, the assessment of the hydraulic potential recovery is analysed through two different energy estimators, one considering the minimum available net head and the other assuming a variable net head. Results show that there are several points where turbines could be installed, most of them recovering in between 1000–5000 kWh, which could be used to cover the yearly energy consumption of about 24–120 m2 of a school or 10–50 traffic lights of such area. Moreover, in some points it could be recovered up to 14500 kWh. Even though these values are not high, the energy recovered could be used for self-consumption of nearby electrical loads, at the time that reduces the pressure in the system, thus leading to leak reductions. Moreover, this kind of energy recovery does not reduce the potential of other proposals for upstream energy recovery, such as replacing pressure reduction valves with turbines instead. The scripts developed to apply the proposed methodology are available in EPANET-Octave file exchange for the researcher community.
•Assessing the energy potential within district metered areas of water supply systems.•The case study uses a real water supply system from the city centre of Murcia, Spain.•The water supply system is modelled through a comprehensive experimental campaign.•Numerous locations showed an energy potential ranging from 1000 to 14500 kWh.
Private family firms, generations and bank debt Díaz‐Díaz, Nieves Lidia; García‐Teruel, Pedro J.; Martínez‐Solano, Pedro
Accounting and finance (Parkville),
09/2023, Letnik:
63, Številka:
3
Journal Article
Recenzirano
Odprti dostop
Abstract
This paper focuses on the use of bank debt by private family firms and whether it is higher for the first generations of family businesses than for their descendants and subsequent ...generations. We use a unique hand‐collected data set of 4,041 private Spanish firms for the years 2004 to 2013. We find statistical evidence that family‐controlled firms make greater use of bank credit. Moreover, we show that first‐generation family firms acquire more bank debt than those of second and subsequent generations. Furthermore, during financial crises, family‐controlled firms were subjected to less rationing, with increased bank financing for first generations.
This paper analyzes the relation between working capital management and profitability for small and medium-sized enterprises (SMEs) by controlling for unobservable heterogeneity and possible ...endogeneity. Unlike previous studies, we examine a non-linear relation between these two variables. Our results show that there is a nonmonotonic (concave) relationship between working capital level and firm profitability, which indicates that SMEs have an optimal working capital level that maximizes their profitability. In addition, a robustness check of our results confirms that firms' profitability decreases as they move away from their optimal level.
Trade credit and SME profitability Martínez-Sola, Cristina; García-Teruel, Pedro J.; Martínez-Solano, Pedro
Small business economics,
03/2014, Letnik:
42, Številka:
3
Journal Article
Recenzirano
Financial literature discusses the motives for trade credit provision by suppliers in depth. However, there is no empirical evidence of the effect of granting trade credit on the profitability of ...small and medium-sized firms. We examine the profitability implications of providing financing to customers for a sample of 11,337 Spanish manufacturing SMEs during the 2000-2007 period. This article also examines the differences in the profitability of trade credit according to financial, operational, and commercial motives. The findings suggest that managers can improve firm profitability by increasing their investment in receivables and that the effect is greater for financially unconstrained firms (larger and more liquid firms), for firms with volatile demand, and for firms with bigger market shares.
Working capital management in SMEs Baños-Caballero, Sonia; García-Teruel, Pedro J.; Martínez-Solano, Pedro
Accounting and finance (Parkville),
September 2010, Letnik:
50, Številka:
3
Journal Article
Recenzirano
This paper analyses the determinants of Cash Conversion Cycle (CCC) for small‐ and medium‐sized firms. It has been found that these firms have a target CCC length to which they attempt to converge, ...and that they try to adjust to their target quickly. The results also show that it is longer for older firms and companies with greater cash flows. In contrast, firms with more growth opportunities, and firms with higher leverage, investment in fixed assets and return on assets have a more aggressive working capital policy.
This paper investigates the relation between the financing strategies of working capital requirement and firm performance for the period 1997 to 2012. Using the two-step generalized method of moments ...estimator, we find that a suitable financing strategy can help firms improve their performance. Moreover, the results indicate that the working capital requirement financing-performance relation changes during a financial crisis. Finally, we also find that this relation depends on a firm’s financial flexibility. The findings are of interest for managers and researchers and show that managers should not only be concerned about investing in working capital requirement but also consider how this investment is to be financed. To the best of our knowledge, this is the first paper to analyse how the financing strategy selected by firms to finance their working capital requirement affects their performance.
Corporate cash holding and firm value Martínez-Sola, Cristina; García-Teruel, Pedro J.; Martínez-Solano, Pedro
Applied economics,
01/2013, Letnik:
45, Številka:
2
Journal Article
Recenzirano
Odprti dostop
This study contrasts the effect of cash holding on firm value for a sample of US industrial firms during 2001-2007. The study tests empirically for the existence of an optimal cash level that ...maximizes firm value. Second, the study analyses whether or not deviations from the optimum cash level reduce firm value. The results show a concave relation between cash holding and firm value, verifying the existence of an optimum level of cash holding. Additionally consistent with the initial analysis, deviations above and below optimal cash holding decreases the firm value.
The object of the research presented in this paper is to provide empirical evidence on the effects of working capital management on the profitability of a sample of small and medium-sized Spanish ...firms. The authors have collected a panel of 8,872 small to medium-sized enterprises (SMEs) covering the period 1996-2002. The authors tested the effects of working capital management on SME profitability using the panel data methodology. The results, which are robust to the presence of endogeneity, demonstrate that managers can create value by reducing their inventories and the number of days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the firm's profitability. This work contributes to the literature in two ways. First, no previous such evidence exists for the case of SMEs. Second, unlike previous studies, in the current work robust test have been conducted for the possible presence of endogeneity problems. The aim is to ensure that the relationships found in the analysis carried out are due to the effects of the cash conversion cycle on corporate profitability and not vice versa.
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