WORKING CAPITAL REQUIREMENTS AND FIRM PERFORMANCE - EVIDENCE FROM FIRMS LISTED ON THE VIETNAMESE STOCK MARKET

The paper contributes to current literature on working capital management and its effect on firm's profitability on three main manners. First, the results indicate that firm-specific factors, including leverage, total asset growth, firm's size, operating cash flow, gross profit margin, tangible fixed asset and Tobin'Q, have a positive relationship with firm's working capital and ROE. Second, the study provides strong evidence that firm's management always attempts to maximize the efficiency of working capital in order to improve firm's performance. Third, firm's management tends to increase working capital beyond its optimal level. The paper additionally indicates that total asset growth, firm's size, and Tobin'Q have a relationship with both working capital and ROE, which have not reported in previous studies.