The influence of working capital management on the performance of Indian companies’ stock market value

Abstract

The study focused on the extent to which Working Capital Management can influence the value of the organization, and it was seen that there was a gap in literature due to inconsistencies of past findings as well as insufficient literature on the subject in the case of Indian financial market. With India being the world’s 5th largest economy and having some 7,800 listed companies, the Indian stock market is important and understanding how its market value is affected by issues like Working Capital Management is a relevant research interest. This formed the premise of the study aim, which was to determine the impacts that Working Capital Management has on the stock market performance of Indian companies. The research context for this study was the Indian stock market in general, and particularly the National Stock Exchange (NSE). Convenience sampling was used to gather the data and a total of 14 companies were included in the final sample. Data was gathered from four main data sources, which include company annual reports, National Stock Exchange stock reports, peer-reviewed journals as well as relevant online sources on the subject. The data were analyzed using correlation to link the Working Capital Management ratios with performance ratios. The first objective was to analyse the extent of working capital in the total structure of sample firms. It was found that working capital practices used by the listed Indian companies are similar to those used by most listed companies in other major markets. The second objective was to analyze the impacts of various financial ratios derived from working capital on stock market performance. From the findings, it was shown that there is a weak negative correlation between these variables.