Juliano Ribeiro de Almeida
Doctorate – Peers effect, working capital management, and firm value
Advisor: Prof. Dr. Eduardo Kazuo Kayo
Comission: Profs. Drs. Roy Martelanc, Rosana Tavares and Wilson Toshiro Nakamura
Class: 217, FEA-5
We use a sample of US manufacturing firms from 1989 to 2018 in order to evaluate the effect of net working capital (NWC) on firm performance. We employ several econometric analyses to test our hypotheses and different specifications of our dependent and main variable of interest. Our results are robust and consistent with prior research on peer effects influencing corporate investment decisions. In addition, our results suggest that (i) the relation between excess working capital investment and company performance is non-linear (for firms with excessive working capital investment, the reduction in resources tied up in working capital in the previous year is positively associated with a better company performance over the subsequent year; however, for firms with low level of NWC, we cannot state that the opposite is true); (ii) we find significant peer effect that are positively associated with firms’ investment in working capital, and find that a one standard deviation increase in the average peer firm working capital investment leads to a 11% increase in firm i’s investment, after controlling for firm-specific factors; and (iii) we estimate the impact of working capital investment on firm’s performance using an instrumental variable framework that confirm that firms with a higher level of working capital are associated with a worst level of firm's performance.
*Abstract provided by the author