Benchmarking the efficiency model for working capital management: data envelopment analysis approach

Seth, Himanshu; Chadha, Saurabh; Sharma, Satyendra

doi:10.1108/ijppm-10-2019-0484

Cited by 20 publications

(29 citation statements)

References 92 publications

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“…To identify the set of inputs and outputs used to assess the efficiency using DEA-SBM, we reviewed the prior literature (Gill and Biger, 2013; Goel and Sharma, 2014; Goel and Sharma, 2015; Goel and Sharma, 2016; Seth et al , 2020a; Seth et al , 2020b; Seth et al , 2021) and the DEA guidelines and notes in how to select variables (Cooper et al , 2007; Ozcan, 2014). Following all previous reviews, the present study model adopted accounts receivable and payable, inventory and cost of goods sold as inputs, whereas net sales and net income as outputs.…”

Section: Methodsmentioning

confidence: 99%

Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE

Habib

Kayani

2022

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Purpose This study aims to explore the relative efficiency of the working capital management (WCM) for Emirati firms before and during the coronavirus crisis. Next, this study explores the potential impact of WCM on the likelihood of financial distress. Design/methodology/approach A data envelopment analysis (DEA) was applied to assess the relative efficiency of the WCM. This study uses the emerging market Z-score model to predict the likelihood of financial distress. The logistic regression was applied to investigate the impact of the efficiency of WCM on firms’ financial distress. Findings The results of this study model showed a negative and significant influence of the efficiency of WCM on firms’ financial distress likelihood. Practical implications The findings have important implications for many stakeholders, including decision makers, WC managers, financiers, investors, financial consultants, researchers and others, in increasing their awareness of firms’ WCM performance before and during the crisis. Further, the results could have implications for trading strategies as investors seek attractive economic gains from their investment in firms that care about WCM. Social implications The implications of WCM performance on social interests would cause firms’ decision makers to operate efficiently and achieve the best practices to minimise the probability of firms' financial distress. Originality/value This study advances a novel contribution to the literature by introducing a novel model to assess WCM based on DEA technology.

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Section: Methodsmentioning

confidence: 99%

Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE

Habib

Kayani

2022

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“…Shifting toward advanced technologies and investing in machine learning and artificial intelligence have derived benefits for economies in contemporary times. Contrarily, the investment levels of Indian manufacturing industries are consistently declining (Seth et al, 2020c). For sustaining in competitive circumstances, Indian manufacturing firms need to invest in digital and innovative technologies.…”

Section: Introductionmentioning

confidence: 99%

Exploring predictors of working capital management efficiency and their influence on firm performance: an integrated DEA-SEM approach

Seth

Chadha

Sharma

et al. 2020

BIJ

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PurposeThis study develops an integrated approach combining data envelopment analysis (DEA) and structural equation modeling (SEM) for estimating the working capital management (WCM) efficiency and evaluating the effects of diverse exogenous variables on the WCM efficiency and firms' performance.Design/methodology/approachDEA is applied for deriving WCM efficiency for 212 Indian manufacturing firms over a period from 2008 to 2019. Also, the effect of human capital (HC), structural capital (SC), cost of external financing (CEF), interest coverage (IC), leverage (LEV), net fixed asset ratio (NFA), asset turnover ratio (ATR) and productivity (PRD) on the WCM efficiency and firms' performance is examined using SEM.FindingsThe average mean efficiency scores ranging from 0.623 to 0.654 highlight the firms operating at around 60% of WCM efficiency only, which is a major concern for Indian manufacturing firms. Further, IC, LEV, NFA, ATR revealed direct effect on the WCM efficiency as well as indirect effect on firms' performance, whereas CEF had only a direct effect on WCM efficiency. HC, SC and PRD had no effects on WCM efficiency and firms' performance.Practical implicationsThe findings offer vital insights in guiding policy decisions for Indian manufacturing firms.Originality/valueThis study is the first to identify the endogenous nature of the relationship of HC, SC, CEF, IC altogether with firms' performance, compounded by the WCM efficiency, by applying a comprehensive methodology of DEA and SEM and provides an efficiency performance model for better decision-making.

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“…It can also increase demand deposits as they are low-cost funds for banks. The optimum utilization of fixed and current assets can also increase the efficiency of the bank (Seth et al, 2020;. This model shows the deviations that pinpoint the asset and liabilities that need attention.…”

Section: Table 7 Interest On Asset and Liability Effect On Profitability Of Allahabad Bankmentioning

confidence: 96%

Optimizing Balance Sheet for Banks in India Using Goal Programming

Tanwar¹,

Vaish²,

Rao³

2021

ijafr

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In earlier years, there was abundance of funds in banks in the form of demand and savings deposits. Hence, the focus of banks was mainly on asset management. But intense competition and volatility of interest rate due to banking reforms reduced the availability of low-cost funds and therefore, banks focused on liability management as well. These pressures call for structured and comprehensive measures and not just ad hoc action. This is how banks started to concentrate more on the management of both sides of the balance sheet. As a result, the concept of asset-liability management originated in India and introduced in the Indian banking industry since 1st April 1999 to administer the risk management aspects. This paper attempts to optimize assets and liabilities of banks using goal programming technique. Secondary data is collected from annual reports of Allahabad bank from 2010-2019 and RBI website is used for modelling. The findings show that in Allahabad bank, goal programming help in achieving optimization and increase profitability. The model incorporating constraints and set objectives. It model can support banks in decision making process, planning, budgeting, and forecasting. An attempt is made to use realistic goals and constraints after discussing with bank officials. JEL Classification Codes: C61, G21, G32.

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Benchmarking the efficiency model for working capital management: data envelopment analysis approach

Cited by 20 publications

References 92 publications

Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE

Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE

Exploring predictors of working capital management efficiency and their influence on firm performance: an integrated DEA-SEM approach

Optimizing Balance Sheet for Banks in India Using Goal Programming

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