International Journal of Business and Economics Volume 18, No. 2 September, 2019

Effects of the 2008 Financial Crisis on the Working Capital Management Policy of U.S. Enterprises

Chong-Chuo Chang

Department of Banking and Finance, College of Management, National Chi Nan University, Taiwan (R.O.C.)

Tai-Yung Kam

International College,Guangzhou College of Commerce, China

Yu-Cheng Chang

Department of Leisure and Recreation Management, College of Management, Asia University, Taiwan (R.O.C.)

Chen-Chen Liu

Department of Finance, College of Management, Asia University, Taiwan (R.O.C.)

Abstract

The literature has not extensively examined the effects of the 2008 financial crisis on the working capital management of U.S. enterprises. That economic turmoil may have caused enterprises to encounter a lack of funds owing to the severe credit crunch, financial constraints, poor liquidity, and other factors, thereby adversely affecting their working capital management policies. This study thus investigates the effects of this global crisis on the working capital management policy of U.S. enterprises using panel data regression with fixed effects. Results reveal no significant effect on the cash conversion cycle (CCC), implying that a financial crisis has no effect on the speed of working capital collection. However, firms with relatively low current and quick ratios during and after a financial crisis period should pay more attention to their liquidity management strategies or take actions prior to the eruption of a crisis so as to prevent themselves from slipping into a liquidity crisis that in turn weakens their financial situation and leads to financial difficulties.

Keywords：working capital management policy, financial crisis, liquidity management policy.

JEL Classifications：G30, G32, G01.

BACK