Journal of Economics and Management  
  In Press, Corrected Proof  
  Available online 25 January 2019  

Impact of Working Capital Management on Profitability: Study on Foreign Ownership in Taiwan

  Yi-Chein Chiang  
  Department of International Business, Feng Chia University, Taiwan  
  Jing-Fen Cheng  
Procurement, Shi Shin Food Co., LTD, Taiwan
  Kuei-Chih Lee  
Department of International Business, National Taichung University of Science and Technology, Taiwan
  Tung Liang Liao  
  Department of Finance, Feng Chia University, Taiwan  



This study examines the relationship between working capital management and profitability during 2000–2016 from the viewpoint of foreign ownership in the Tai-wan stock market. Our findings reveal that a rise (decline) in working capital in-vestment increases (decreases) profitability for foreign-controlled firms with lower net working capital (NWC) levels, where firms’ NWC investments are generally in-sufficient. However, this phenomenon cannot be observed at higher NWC levels, where firms tend to make excess NWC investments. Further, we find no such asymmetric effect for firms without foreign ownership. Moreover, firms with higher foreign ownership are less likely to have a stronger effect on NWC management. These findings show that foreign investors positively impact profitability at the low-er NWC level, and this is particularly true for firms with lower foreign ownership in the Taiwan stock market.




Keywords: foreign ownership; working capital management; profitability    



JEL classification: G10, G30, G32