An Examination of Working Capital Management Practices

The gap, both perceived and real, between academics and practitioners is a major concern in industry, accrediting organizations and business schools today. The proposed project will bridge a significant gap between academics and practitioners in the management of working capital. In most case-based capstone financial management courses, the topic of short-term asset management comprises the majority of the subject area covered. Copeland (2002) presents an interesting discussion from all perspectives on the deficiencies in three major classroom topics desired by chief financial officers. He suggests tax policy, deal structuring and working capital management as a potpourri of missing topics (Copeland, 2002, page 10.). Recently, Brealy, Myers and Marcus (2009) in their discussion of What We Do Not Know: Seven Unsolved Problems in Finance (pages 692-695), suggest the value of liquidity and/or the question of why firms hold cash is still an unanswered question in the discipline. The primary motivation for this research project is an extensive survey of working capital preferences of domestic and international firms published in 1998 and was based on survey data from 1996 (Maxwell, Gitman and Smith, 1998). This thirteen plus year lag in the literature warrants revisiting as the topic for this research study