Download This PaperThe Speed of Adjustment in Net Operating Working Capital: An International Study
Forthcoming, Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad DOI: 10.1080/02102412.2020.1864176
30 Pages Posted: 8 Mar 2021
Date Written: January 7, 2021
Abstract
This paper analyses whether there are differences in the speed of adjustment in net operating working capital (NWC) across countries. Unlike prior research, which reported that the adjustment speed of any current item is always rapid, we find that the speed of adjustment to NWC targets depends on a country’s investor protection and financial development. Specifically, using a sample of firms from 30 countries, we show that NWC adjustment speeds vary across countries, and they are faster for companies that operate in countries with stronger investor protection and greater financial development.
Keywords: Net operating working capital, adjustment speed, legal system, financial development
JEL Classification: G15, G18, G31, G32
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