The Relationship Between Working Capital Toward Firm Value (Evidence from Retail Companies in Indonesia)

Abstract

In the midst of fierce business competition, having a competitive advantage is a key to achieve sustainability and to increase firm value. Competitive advantage can be achieved when the company is able to manage its resources well. Working capital is one of the important resources to be well-managed by the management. This research aims to analyze the relationship between working capital on firm value. Specifically, it investigates the effect of cash conversion period, inventory conversion period, receivable collection period, and payable payment period on firm value. This research study uses a purposive sampling method. The research data are from nineteen retail companies that are listed on Bursa Efek Indonesia or Indonesian stock exchange during the period of 2014-2018. The findings reveal that cash conversion cycle and payable payment period have a positive effect on firm value, while, receivable collection period and inventory conversion period have a negative effect on firm value.