Abstract:
This research study investigated the impact of working capital management policies
on firm value in Sri Lankan companies. Data were gathered from a sample of 24
companies listed in Colombo Stock Exchange. It covers the manufacturing sector
from period of 2010 to 2014. Aggressive working capital management policy
(AWCMP), Conservative working capital management policy (CWCMP), Moderate
working capital management policy (MWCMP), investing policy (IP) and Financing
policy (FP) were used as independent variables. Firm value is measured in terms
market value addition (MVA) and was employed as dependent variable in the study.
The multiple regression analysis was used. The results indicate that there is a
statistically significant positive relationship between conservative working capital
management policy, aggressive working capital management policy, moderate
working capital management policy and market value addition of the firm. It further
explains the firms that follow aggressive working capital management policy yields
higher market value additions than the firms with other two types of policies. Similarly
it indicates that there is a significant negative relationship between market value
additions and investing policy and financing policy. Accordingly the results conclude
that the firms following aggressive, conservative and moderate working capital
management policies improved the market value additions of the firms in Sri Lanka.
