International Management Review Vol. 4 No.

1 2008

The Impact of Firms’ Capital Expenditure on Working Capital

Management: An Empirical Study across Industries in Thailand
B.A Ranjith Appuhami
Department of Accounting, University of Sri Jayewardenepura
Sri Lanka. ranjith_srilanka@yahoo.com

[Abstract] The purpose of this research is to investigate the impact of firms’ capital
expenditure on their working capital management. The author used the data colleted from
listed companies in the Thailand Stock Exchange. The study used Shulman and Cox’s (1985)
Net Liquidity Balance and Working Capital Requirement as a proxy for working capital
measurement and developed multiple regression models. The empirical research found that
firms’ capital expenditure has a significant impact on working capital management. The study
also found that the firms’ operating cash flow, which was recognized as a control variable, has
a significant relationship with working capital management, which is consistent with findings
of previous similar researches. The findings enhance the knowledge base of working capital
management and will help companies manage working capital efficiently in growing
situations associated with capital expenditure.
[Keywords] Capital expenditure; Thailand stock exchange; working capital; firm

Introduction
Background
Corporate finance basically deals with three decisions: capital structure decisions, capital
budgeting decisions, and working capital management decisions. Among these, working
capital management is a very important component of corporate finance since it affects the
profitability and liquidity of a company. It deals with current assets and current liabilities.
Working capital management is recognized as an important concern of the financial manager
due to many reasons. For one thing, a typical manufacturing firm’s current assets account for
over half of its total assets. For a distribution company, they account for even more. The
maintenance of excessive levels of current assets can easily result in a substandard return on a
firm’s investment. However, firms with inadequate levels of current assets may incur
shortages and have difficulties in smoothly maintaining day-to-day operations (Horne and
Wachowicz, 2000). Efficient working capital management involves planning and controlling
current assets and current liabilities in a manner that eliminates the risk of inability to meet
due short term obligations on one hand and avoids excessive investment in these assets on the
other hand (Eljelly, 2004).

Many exiting research papers have found that managers spend a considerable time on day-to-
day working of capital decisions since current assets are short-lived investments that are
continually being converted into other asset types (Rao, 1989). In the case of current liabilities,
the firm is responsible for paying obligations mentioned under current liabilities on a timely
basis. Liquidity for the on-going firm is reliant, rather, on the operating cash flows generated
by the firm’s assets (Soenen, 1993). As a result, working capital management of a company is
a very sensitive area in the field of financial management (Joshi, 1994). It involves the
decisions about the amount and composition of current assets and the financing of these assets.

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The decision-making process on the level of different working capital components has
become frequent, repetitive, and time-consuming.

Corporations are looking for new ways to stimulate growth, improve financial performance,
and reduce risk in today’s challenging economic climate. Funds tied up in working capital can
be seen as hidden reserves that can be used to fund growth strategies, such as capital
expansion. Cash flows locked in stock and receivables can be freed up by understanding the
determinants of working capital. Many organizations that have earned profits over the years
have shown the efficient management of working capital (WCM). The successful
management of working capital is essential for short-run corporate solvency or the survival of
any organization. Especially, efficient WCM will lead a firm to react quickly and
appropriately to unanticipated changes in market variables, such as interest rates and raw
material prices, and gain competitive advantages over its rivals. Too often, however, this is an
area that many organizations have ignored. The way of managing working capital efficiently
varies from firm to firm since it depends on industry, the nature of the business, business
policy, strategy, etc. Thus, it is very important for an organization to understand the way to
manage working capital efficiently.

Most researchers have attempted to understand the factors that determine the working capital
of an organization. Horrigan (1965), Luo (1984), Liu (1985), Zhou (1995), and Su (2001)
found that growth of the firm, size, and leverage etc. affect the working capital of a company.
Broadly, industry characteristics, firm-specific characteristics, and the financial environment
are recognized as determining factors of working capital. However, still, there are firms that
are struggling to manage working capital since they don’t have a sufficient understanding of
the determining factors of working capital. In addition to the growth, leverage, and the size of
a company, type, and size of expenditures, such as finance and operating and capital
expenditures, have different impacts on working capital.

Research Objectives
Overall objective. The overall objective of this research study is to investigate the impact of
capital expenditure on the working capital measured in terms of net liquidity balance (NLB)
and working capital requirement (WCR).

Specific objectives are to

• Investigate whether there is a relationship between capital expenditure and the firm’s
working capital.
• Describe the relationship between the nature of expenditure and the working capital.
To investigate the impact of different factors affecting the working capital on net
liquidity balance and working capital requirement.
• Investigate the existing literature on working capital management to highlight the
recent trends.
• Understand the applicability of NLB and WCR as a measure of working capital
management.
• Investigate the relationship between corporate performance and working capital
management.

Scope of the study. The study mainly focuses on the companies listed in Thai Stock Exchange.
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The banking, finance, and insurance industries have been excluded from the study since the
special nature of those industries in the working capital management. The study uses financial
data of business sectors for the period from 2000 to 2005.

Literature Review
The chief financial officers of most companies spend most of their time and effort on day-to-
day working capital management. Still, due to the inability of financial managers to properly
plan and control the current assets and current liabilities of their companies, the failure of a
large number of businesses can be attributed to the inefficient working capital management
(Smith, 1973). Though it takes little attention, the importance of working capital management
can be seen over previous years.

Over twenty years ago, Largay and Stickney (1980) reported that the bankruptcy of W.T.
Grant, a nationwide chain of department stores that should have been anticipated because the
corporation had been running a deficit cash flow from its operations for eight of the last ten
years of its corporate life. As part of a study of the Fortune 500’s financial management
practices, Gilbert and Reichert (1995) have found that account receivable management
models are used in 59% of these firms to improve working capital management projects,
while, inventory management models were used in 60% of companies. Smith (1973) has
identified eight major theoretical approaches taken towards the management of the working
capital. He stresses the need for the development of a viable model with the dual finance goals
of profitability and liquidity, and argues that only such models will assist practicing financial
managers in their day-to-day decision-making.

Over the years, many researchers have focused on determining the optimal level of each
component working capital. Gentry (1979) found that the working capital literature is rather
limited and that the management of short term resources is not understood too well by
academicians. Thus, the consensus in academia seems to recognize the paucity of theory
concerning the management of financial resources due to the inherent difficulties in the
development of a working capital decision model, while accepting the normative needs for a
more critical examination. Across a limited sample, Weinraub and Visscher (1998) observed a
tendency of firms with low levels of current ratios to have low levels of current liabilities.
Maness and Zietlow (2004) presented two models of value creation that incorporate effective
short-term financial management activities. However, these models are generic models and do
not consider unique firm or industry influence. An extensive survey of library and internet
resources provides very few reports about working capital management. The most relevant set
of articles is Weisel and Bradley’s (2003) article on cash management and inventory control
as a result of effective supply-chain management by Hadley (2004).

Working Capital Management

According to Van Horne (1977), working capital management is the administration of current
assets in the name of cash, marketable securities, receivables, and inventories. Osisioma
(1997) described working capital management as the regulation, adjustment, and control of
the balance of current assets and current liabilities of a firm such that maturing obligations are
met, and the fixed assets are properly serviced. In order to manage working capital efficiently,
there must exist two elements as necessary components and desirable quantities. Osisioma

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(1997) demonstrated that good working capital management must ensure an acceptable
relationship between the different components of a firm’s working capital so as to make an
efficient mix, which will guarantee capital adequacy. Thus, working capital management
should make sure that the desirable quantities of each component of the working capital are
available for management. However the question is “What determines the necessary
components of a firm’s working capital and how much of such necessary components can be
regarded as adequate or desirable?”

The necessary components of an organization’s working capital, basically, depend on the type
of business and industry. Cash, debtors, receivables, inventories, marketable securities, and
redeemable futures can be recognized as the common components of organization’s working
capital. However, the question is to recognize the factors that determine the adequacy of
working capital based on growth, size, operating cash flow, etc. The inability to understand
the determining factors and measurement of adequate amounts of working capital will lead an
organization to bankruptcy.

Methodology
The purpose of this research is to contribute to a very important aspect of financial
management known as working capital management with reference to Thailand. The study
will show the impact of capital expenditure on firms’ working capital management. This
chapter of the research deals with the analytical framework of data analysis, which describes
the firms and variables included in the study, the distribution patterns of data, and applied
statistical techniques in investigating the relationship between working capital management
and capital expenditure.

Data Collection
Since the study is based on financial data, the main source of data was financial statements,
such as income statements, balance sheets, and cash flow statements of listed companies for
the period from 2000 to 2005. The reason for restricting the time period to six years was that
the latest data for the study was available for these years. In addition, annual reports of
companies have been used in order to understand the company back ground and industry.

Sample Selection
The study uses data of listed companies in the stock exchange in Thailand, as the sample.
Companies with missing data are excluded from the study. The study also excludes the
financial and securities sector companies, as their financial characteristics and use of leverage
are substantially different from other companies. After eliminating outliers, the sample size is
416 companies (Table 3.2) with l613 company- years.

Table 3.2. Nature of Participating Firms

No Industry/Sector No. companies Percentage (%)

01 Property & Construction / Property

Development 54
12.98
02 Agro & Food Industry / Food and
Beverage 43 10.34

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03 Medium-Sized Enterprise
29 6.97
04 Consumer Products / Fashion
26 6.25
05 Services / Media & Publishing
26 6.25
06 Property & Construction /
Construction Materials 25 6.01
07 Technology / Information &
Communication Technology 22 5.29
08 Industrials / Industrial Materials &
Machinery 20 4.81
09 Resources / Energy & Utilities
19 4.57
10 Companies Under Rehabilitation
16 3.85
11 Services / Tourism & Leisure
15 3.61
12 Services / Commerce
15 3.61
13 Consumer Products / Personal
Products & Pharmaceuticals, Home
& Office Products 14 3.37
14 Industrials / Automotive
14 3.37
15 Industrials / Packaging
13 3.13
16 Services / Transportation & Logistics
13 3.13
17 Technology / Electronic Components
12 2.88
18 Industrials / Petrochemicals &
Chemicals 11 2.64
19 Industrials / Automotive
11 2.64
20 Services / Health Care Services
11 2.64
21 Industrials / Paper & Printing
Materials 03 0.72
22 Resources / Mining
02 0.48
23 Services / Professional Services
02 0.48

Total 416 100.00

Variables
In addition to identifying capital expenditure, the study undertakes the issue of identifying all
the variables that affect the working capital management. Most of the variables identified in
the investigation have been taken from the existing literature on working capital management.
The study takes into account of all the variables discussed below. Variables, which include
dependent, independent, and control variables, have been used to investigate the test
hypothesis.

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Independent Variables
Capital expenditure (CAPEX) is identified as one of the independent variables in the
investigation and includes expenditures incurred by firms for acquisition and upgrading
physical assets, such as land, buildings, machinery, vehicles, and equipments. Capital
expenditures are added to assets account and depreciated against profits over their economic
lifetimes. Capital expenditure is incurred by a company when buying new, fixed assets or in
adding value to existing assets to increase their economic lives. Capital expenditure includes
buying the value of assets, carriage inwards, insurance, legal costs, and all costs needed for
acquiring assets ready for use. Managers pay careful attention to capital expenditure decisions,
since they are very costly and irreversible.

Operating expenditure (OPEX) is the cost of ongoing operations, product or system. Unlike
CAPEX, firms meet OPEX continuously. Operating expenditures are written off against profit
for the period. They include salaries, wages and facilities expenses, such as rent, rates,
electricity, etc. Finance expenditure (FIEX) is cost incurred on debt capital. Interest incurred
on debentures, bank loan and other long term liabilities are recognized as finance
expenditures.

Dependent Variables
NLB = (cash and cash equivalents + short-term investment) - (short-term debt + commercial
paper payable + long-term debt a year term). These are considerations of the financial
decisions of a company, regardless of the operation cycle. Thus, it is called as net liquid
balance. WCR = (accounts receivable + inventories) - (accounts payable + accrued expenses
+other payable), which relate to the working cycle and are called working capital
requirements.

Control Variables
In addition, firms’ operating cash flow (OPCASH), extracted cash flow statement, growth
(GRO) of the firm measured by sales, leverage measured by total long-term debt capital and
divided by equity (D/E). All the above variables have relationships that affect working capital
management. These relationships might vary over variables, companies and industries based
on business strategy, economic environment, and financial environment.

Hypotheses Development
Working capital management is traditionally rated by current ratio, quick ratio, and net
working capital. According to Shulman and Cox (1985), these traditional ratios don’t consider
the going concern of the company and net working capital does not measure the correct value
of liquidity. They classify net working capital into working capital requirement (WCR) and
net liquidity balance (NLB) in order to predict the financial crisis of a company. WCR is
measured in order to evaluate the management of working capital, and NLB is considered
with the capability of raising and allocating capital respectively. Especially, Shulman and Cox
found that NLB is better than traditional indicators in terms of predicting crisis and liquidity
of a company. Hawawini, Viallet and Vora (1986) have also found that evaluation or working
capital based on NLB and WCR were better than any traditional indicators. Jeng-Ren and Li
Cheng (2006) used NLB and WCR to investigate the determinants of the working capital
management and found that operating cash flow and debt ratio of a firm affect its WCM. This
study also uses the WCR and NLB proposed by Shulman and Cox (1985) as indicators for

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working capital management to evaluate the impact of capital expenditure on working capital.

Statement of financial accounting standards No 95 (SFAS 95) established current cash flow
format to replace the old sources and uses of funds statement in 1987. SFAS 95 segregates
cash flows into operating, investment, and financing flows. In particular, operating cash flow
is desirable to lenders because of its incorporation of working capital changes into the income
statement. Thus, this study will categorize expenditure of a firm into three types: operating
expenditure, capital (investment) expenditure, and finance expenditure. However, except
capital expenditure, operating and finance expenditures will be considered on accrual basis,
not on the cash basis, because incurred expenditure will determine working capital
management of the company.

Kim, Mauer, and Sherman (1998), Opler (1999), and Wu (2001), demonstrated that more
growth opportunities and more fluctuations of future cash flows will increase the cash balance
and short-term investments of a company. Thus, expected cash flows and growth
opportunities have positive correlation with NLB. When a company has growth opportunities,
it needs to acquire fixed assts (pay capital expenditure) relevant to future growth plans. Thus,
incurred or expected capital expenditure is positively correlated with NLB. With growth
opportunity, a company can increase the holding cash, since it manages working capital
efficiently. Under such circumstances, terms to pay operation-related liabilities are lengthened
and operation-related receivables can be accelerated in collection, causing less demand on
working capital. Expected capital expenditure is negatively related to WCR, and firms with a
higher growth rate pay more attention on the management of capital expenditure.

H1a- capital expenditure is positively related to NLB

H1b- capital expenditure is negatively related to WCR

Research Framework
The graphic below illustrates the research framework used in this research.

Growth opportunities Increase NLB Decrease in WCR

H1a
H1b

Capital Expenditure

Model Specification
This study uses panel data regression analysis of cross-sectional in order to test the hypothesis.
I use the pooled regression type of panel data analysis. The pooled regression, which is also
called the constant coefficients model, is one in which both intercepts and slopes are constant,
where the cross section from a data and time series data are pooled together in a single
column, assuming that there are no significant cross section or temporal effects. The general
forms of our models are

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n
NLBit = β0 + Σ β X + ε (1)
all i it

n
WCRit = β0 + Σ β X + ε (2)
all i it

WCR: working capital requirement of firm I at time t; i = 1, 2, …, 416 firms.

NLB it: net liquidity balance of firm i at time t; i = 1, 2, …, 416 firms.
β0: the intercept of equation
βi: coefficients of X it variables
X it: the different independent variables for working capital management of firm i at
time t
t: time = 1, 2,……,6 years.
ε: the error term

Specifically, when I convert the above general least squares model into my specified

NLBi = β OPEXi + β FIEXi + β CAEXi + β M/Bi+ β Gthi + β D/Ei + β OCSH + ε (3)

WCRi = β OPEXi + β FIEXi+ β CAEXi + β M/Bi+ β Gthi + β D/Ei + β OCASH + ε (4)

where
NLB = (cash & cash equivalents + short term investments) – (short term debt + commercial
paper payable + Long term debt year term)
WCR = (accounts receivable + inventories) – (accounts payable + other payable). WCR
equals net working capital - NLB.
β = coefficient of regression,
OPEX = operating expenditure
FIEX = financial expenditure
CAEX= capital expenditure
M/B = market to book value ratio
D/E = total debt to total assets
Gt = sales growth
OCASH = operating cash flow in firm
ε = the error term

Data Analysis and Interpretation

Regression Analysis
I investigate the impact of capital expenditure on working capital management via regression
analysis using 1613 firm-year observations. In developing the regression analysis, I have
taken into account certain variables that affect working capital management: finance
expenditure, operating expenditure, operating cash flow, growth in sales, and leverage. I have
used NLB and WCR as proxies of the management of working capital. The results are shown
in Tables 4.3a to 4.3f. This regression is estimated using the pooled least squares method with
no weights. The model that I have applied for the net liquidity balance is shown in equation

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According to Table 4,3a, capital expenditure has a high significant relationship with net
liquidity balance. The regression coefficient of capital expenditure is 0.531 with a P-value of
(0.000). This means that net liquidity balance is increased by 0.531 for each one bath of
capital expenditure. The test result shows that there is no possibility of getting zero (0) value
for a coefficient of capital expenditure since the P-value is (0.000). These findings support the
H1a hypothesis.

In addition to capital expenditure, operating expenditure, interest expenditure, and operating

cash flow have significant relationships with a coefficient of 0.043, -3.748 and 0.472
respectively. These variables also have no possibility of getting zero (0) values for a
coefficient. However, leverage (D2E), and performance (M2B) don’t show significant
relationships with net liquidity balance. Thus, these two variables can be dropped from the
regression model since these variables have the possibility of getting zero value for
coefficients and no possibility of predicting net liquidity balance. Thus, hypothesis H2a and
H3a can be accepted. According to the Table 4.3b, the ANOVA test proved that there is no
possibility of getting zero values for all regression coefficients of variables or there is a
possibility that at least one regression coefficient will get more than a zero value. The
ANOVA test shows that the model has the possibility of predicting net liquidity balance with a
high significance level since the P-value is (0.000). Table 4.3c shows the model summary.
The model summary has proved that 40.4% of the variation in net liquidity balance can be
explained or accounted for and independent variables recognized in the regression model.

NLBi = β OPEXi + β FIEXi + β CAEXi + β M/Bi+ β Gthi + β D/Ei + β OCSH + ε

Table 4.3a
Coefficients (NLB)
a. Dependent Variable: NLB
Unstandardized Standardized 95% Confidence Interval
Model Coefficients Coefficients T Sig. for B
Upper
B Std. Error Beta Lower Bound Bound
1 Constant -174.085 151.597 -1.148 .251 -471.434 123.263
CAPEX .531 .063 .268 8.428 .000 .407 .654
OPEX .043 .007 .222 6.113 .000 .029 .057
INEX -3.748 .158 -.615 -23.780 .000 -4.057 -3.439
OPCAS
.472 .053 .336 8.923 .000 .368 .576
H
D2E -320.507 185.466 -.034 -1.728 .084 -684.289 43.275
M2B 12.013 17.948 .013 .669 .503 -23.190 47.217
GRT .095 .156 .012 .612 .541 -.210 .401

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Table 4.3b
ANOVA (NLB)
Sum of
Model Squares Df Mean Square F Sig.
1 Regressio 298425278 4263218267.0
7 155.448 .000(a)
n 69.169 24
Residual 440177164
1605 27425368.520
74.818
Total 738602443
1612
43.987

a. Predictors: (Constant), GRT, OPEX, M2B, D2E, INEX, CAPEX, OPCASH

b. Dependent Variable: NLB

Table 4.3c
Model Summary (NLB)
Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .636(a) .404 .401 5236.92357

Predictors: (Constant), GRT, OPEX, M2B, D2E, INEX, CAPEX, OPCASH

Equation (4) shows the regression model of working capital requirement (WCR) with
dependent variables, such as operating expenditure, interest expenditure, capital expenditure,
market to book value, growth in sales, leverage, and operating cash flows. According to table
4.3d, the test result proves that capital expenditure has a significant negative relationship with
working capital requirement. The regression coefficient of capital expenditure is -0.622 and
the P-value is (0.000). According to the test result, capital expenditure can be recognized as a
significant factor in predicting working capital requirement but has no possibility of getting
zero regression coefficients. The regression coefficient (-0.622) means that working capital
requirement is decreased by -0.622 for each one Bath invested in capital expenditure. In other
words, companies tend to manage working capital requirements efficiently when they tend to
invest in capital expenditure with the purpose of getting profit from growth opportunities.
These findings are consistent with hypothesis H1b.

Operating expenditure and interest expenditure also have a positive significant relationship
with working capital requirement. Table 4.3d shows that companies tend to increase their
working capital requirement with increases in operating expenditure and interest expenditure.
It seems that companies hold more current assets when they have commitments to pay interest.
The regression coefficients of operating expenditure and interest expenditure are 0.096 and
0.375, respectively. Both expenditures have P-values of (0.000) and suggest that there is no
possibility of getting zero for a regression coefficient. These findings reject the hypothesis
H2b and H3b.

Operating cash flow shows significant negative relationships with working capital
requirement. Working capital requirement will be decreased by -0.383 for each one Bath
increase in operating cash flow. According to test results, the regression coefficient of
operating cash flow has possibility of being zero since the test result is significant with the P-
value of (0.000). This suggests that companies tend to manage working capital efficiently,
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since that results in an increase in operating cash flows. On the other hand, when companies
have growth opportunities associated with cash flows and capital expenditure, they tend to
manage working capital efficiently in order to increase operating cash flow.

Other variables, such as leverage (D2E), performance (M2B) and growth (grt), have positive
relationships with working capital requirement with regression coefficients of 226.14, 5.05
and 0.076, respectively. These variables can be dropped from the regression models, since the
regression coefficients of these variables have the possibility of getting zero values and have
no ability to predict variance in working capital requirement. The global test results of WCR
are shown in Table 4.3e and which have significantly (P-value = 0.00) proved that there is no
possibility for all the variables to get a zero regression coefficient. It means at least one
independent variable has a regression coefficient which is different from zero (0). According
to Table 10, 30.4% of the variation in working capital requirement is explained by the
variation in independent variables, such as capital expenditure, interest expenses, operating
expenses, and operating cash flows.

WCRi = β OPEXi + β FIEXi+ β CAEXi + β M/Bi+ β Gthi + β D/Ei + β OCASH + ε

Table 4.3d. Coefficients (WCR)

M
o Standardize
d d
e Unstandardized Coefficient 95% Confidence Interval
l Coefficients s T Sig. for B
Upper
B Std. Error Beta Lower Bound Bound
1 415.145 100.773 4.120 .000 217.484 612.806
-.622 .042 -.511 -14.856 .000 -.704 -.540
.096 .005 .797 20.284 .000 .086 .105
.375 .105 .100 3.578 .000 .169 .580
-.383 .035 -.444 -10.905 .000 -.452 -.314
226.141 123.288 .038 1.834 .067 -15.681 467.964
5.504 11.931 .010 .461 .645 -17.897 28.906
.076 .104 .015 .729 .466 -.128 .279
a. Dependent Variable: WCR

Table 4.3e.
ANOVA (WCR)

Sum of
Model Squares Df Mean Square F Sig.
1 Regressio 84992869 1214183857.
7 100.189 .000(a)
n 99.217 031
Residual 19450823 12118892.92
1605
138.967 1
Total 27950110
1612
138.184

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a. Predictors: (Constant), GRT, OPEX, M2B, D2E, INEX, CAPEX, OPCASH

b. Dependent Variable: WCR

Table 4.3f.
Model Summary (WCR)

Adjusted Std. Error of

Model R R Square R Square the Estimate
1 .551(a) .304 .301 3481.22003

a. Predictors: (Constant), GRT, OPEX, M2B, D2E, INEX, CAPEX, OPCASH

Conclusions and Recommendations

Working capital management attracts less attention from management than capital budget and
capital structure in financial management in the ordinary course of business. Working capital
management relates to the findings of sources of short term finance and invests in short term
assets. Working capital management deals with profitability and the risk of the company.
Inefficient working capital management results in over investment in working capital and
reduces the profitability of the firm. On the other hand, inefficient management of working
capital leads to an insufficient amount of working capital and results in financial difficulty,
putting the company at risk. The optimal level of working capital, which is a trade off
between risk and profitability, can be affected by both internal organizational characteristics
and various outside factors.

Existing literature has paid little attention to many factors that determine the working capital.
This research investigated some of the factors such as capital expenditure, operating
expenditure, finance expenditure, leverage, performance and operating cash flow. This
research paper uses NLB and WCR as proxies for working capital in order to assess working
capital management with capital expenditure and other influencing factors. Empirical results
show that capital expenditure has a significant effect on working capital management. This
finding will help a company’s management manage working capital efficiently. Especially, the
findings can be used as a benchmark for managing working capital and evaluating
performance. Through this research, I was able to find out that operating cash flow has a
significant impact on a company’s working capital management, consistent with conclusions
in previous research.

On the basis of the findings of the research, it can be concluded that the listed companies in
Thailand change their working capital management policies based on many factors, such as
capital expenditure, operating cash flow, sales growth, etc. Thus, I can recommend that firms
operating in other countries consider the pattern of capital expenditure in managing working
capital. Especially, the findings suggest that companies manage working capital efficiently
when companies have growth opportunities so that they can meet required capital expenditure
to expand their business.

Especially, this model can be used as a benchmark to evaluate performance of working capital
management in growing companies that are meeting capital expenditures in the period of
growing opportunities and so that the companies can make sure that they will not encounter

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financial difficulties while motivating the managers. The study has been conducted on whole
industries, irrespective of the business differences. By conducting the same study on each
business sector separately, managers can understand specific behavior of a company’s
working capital in relationship with capital expenditure. Since the model is a general model, it
might not be able to be applied or might not give the same findings in specific business
sectors. Moreover, further research can be conducted on the same topic in different countries
so that working capital management policies can be compared between developing and
developed countries in order to determine the correct management policies.

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