Does Working Capital Management Affect the Profitability of Property and Real Estate Firms in Indonesia?

Johan Firmansyah, Hermanto Siregar, Ferry Syarifuddin

Abstract


During 2013-2017, the increase in net profit of property companies in Indonesia was accompanied by an increase in the cash conversion cycle and net working capital ratio which indicated that performance was increasing but not in cash flow and management of working capital was not productive. The purpose of the study to determine the significant effect of working capital management on profitability and working capital element which has the dominant effect. This study used control variables of sales growth, company size, interest rate, and exchange rate. This study used a descriptive approach and panel data regression. The results showed that the Cash Conversion Cycle (CCC) had a significant negative effect on OPM, ROA, and ROE. Current asset to total assets ratio (CATAR) had a significant positive effect on ROA and ROE. Current liabilities to total assets ratio (CLTAR) have a positive effect significant to OPM and debts to total asset ratio (DTA) have a significant negative effect on OPM and ROA. While CLTAR had the most dominant effect on OPM because it has the highest estimation coefficient among others and the company more aggressive in implementing its working capital policy to achieve higher operating profit.

JEL Classification: C33, G31, E43, F31

DOI: https://doi.org/10.26905/jkdp.v22i4.2438


Keywords


Operating Profit Margin; Profitability; Return on Assets; Return on Equity; Working Capital Management

Full Text:

PDF

References


Adiningsih, S. (1998). Perangkat Analisis dan Teknik Analisis Investasi di Pasar Modal Indonesia. Jakarta: PT Bursa Efek Indonesia.

Andriyani, I., & Armereo, C. (2016). Pengaruh suku bunga, inflasi, nilai buku terhadap harga saham perusahaan indeks LQ45 yang terdaftar di Bursa Efek Indonesia (BEI). Jurnal Ilmiah Orasi Bisnis, 15, 44-64.

Baidh, M. L. (2013). Effecte of working capital management on profitability of company. Anusandhanika 5(2), 247-251.

Brealey, M., & Marcus. (2008). Dasar–Dasar Manajemen Keuangan Perusahaan. Jakarta: Erlangga.

Brigham, E. F., & Ehrhardt, M. C. (2005). Financial Management: Theory and Practice. 11th Edition. Ohio: Thomson South Western.

Brigham, E. F., & Houston, J. F. (2010). Dasar-dasar Manajemen Keuangan. Edisi 11. Jakarta: PT. Salemba Empat.

Dalayeen, B. A. (2017). Working capital management and profitability of real estate industry in Jordan: An empirical study. Journal of Applied Finance & Banking, 7(2), 49-57.

Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3-4), 573-588. https://doi.org/10.1111/1468-5957.00008

Enqvist, J., Graham, M., & Nikkinen, J. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance, 32(8), 36–49. https://doi.org/10.1016/j.ribaf.2014.03.005

Gill, A., Biger, N., & Mathur, N. (2010). The relationship between working capital management and profitability: Evidence from the United States. Business and Economics Journal, 2010: BEJ-10, 1-9.

Gitman, L. J. (1974). Estimating corporate liquidity requirements: A simplified approach. The Financial Review, 9(1), 79-88. https://doi.org/10.1111/j.1540-6288.1974.tb01453.x

Iba, Z., & Wardhana, A. (2012). Pengaruh inflasi, suku bunga SBI, nilai tukar Rupiah terhadap USD, profitabilitas, dan pertumbuhan aktiva terhadap harga saham perusahaan pembiayaan di Bursa Efek Indonesia. Jurnal Kebangsaan, 1(1), 1-6.

Suzana, A. R., & Azlina, N. (2013). Faktor-faktor yang mempengaruhi struktur modal pada perusahaan real estate and property yang go public di Bursa Efek Indonesia. Jurnal Ekonomi Universitats Riau, 1-10.

Lyngstadaas, H., & Berg, T. (2016). Working capital management: Evidence from Norway. International Journal of Managerial Finance, 12(3), 295-313. https://doi.org/10.1108/IJMF-01-2016-0012

Michello, F. A., & Wanorie, T. O. (2015). Analyzing the effect of working capital management on the profitability of small size US healthcare companies. International Research Journal of Applied Finance, 6(5), 394-406.

Mulyono, S., Djumahir, & Ratnawati, K. (2018). The effect of capital working management on the profitability. Jurnal Keuangan dan Perbankan, 22(1), 94-102. https://doi.org/10.26905/jkdp.v22i1.1332

Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221. https://doi.org/10.1016/0304-405X(84)90023-0

Nyabuti, W. M., & Alala, O. B. (2014). The relationship between working capital management policy and financial performance of companies quoted at Nairobi securities exchange, Kenya. International Journal of Economics, Finance, and Management Sciences, 2(3), 212-219. https://doi.org/10.11648/j.ijefm.20140203.12

Nwude, E. C., Agbo, E. I., & Lamberts, C. I. (2018). Effect of cash conversion cycle on the profitability of public listed insurance companies. International Journal of Economics and Financial Issues, 8(1), 111-117.

Octafia, S. (2013). Pengaruh tingkat suku bunga SBI, nilai tukar, dan jumlah uang beredar terhadap indeks harga saham sektor property dan real estate dengan pendekatan error correction model. Jurnal Manajemen, 2(1), 5-9.

Padachi, K. (2006). Trends in working capital management and its impact on firms’ performance: An analysis of Mauritian small manufacturing firms. International Review of Business Research Papers, 2(2), 45 -58.

Pagano, P., & Schivardi, F. (2003). Firm size distribution and growth. Scandinavian Journal of Economics, 105(2), 255-274. Retrieved from: http://www.jstor.org/stable/3441044

Pais, M. A., & Gama, P. M. (2015). Working capital management and SMEs profitability: Portuguese evidence. International Journal of Managerial Finance, 11(3), 341–358. https://doi.org/10.1108/IJMF-11-2014-0170

Garcia-Teruel, P. J., & Martinez-Solano, P. (2007). Effects of working capital management on SME profitability. International Journal of Management Finance, 3(2), 164-177. https://doi.org/10.1108/17439130710738718

Raheman, A., Afza, T., Qayyum, A., & Bodla, M. A. (2010). Working capital management and corporate performance of manufacturing sector in Pakistan. International Research Journal of Finance and Economics, (47),151-163.

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2008). Corporate Finance Management. International Edition. New York: Mc-Graw Hill.

Santoso. (2009). Pengaruh perputaran piutang dan pengumpulan piutang terhadap likuiditas perusahaan pada CV. Bumi Sarana Jaya di Gresik. Jurnal Logos, 6(1), 37–54.

Sartono, R. A. (2010). Manajemen Keuangan Teori dan Aplikasi. Yogyakarta: BPFE-Yogyakarta.

Utami, M. S., & Dewi, M. R. (2016). Pengaruh manajemen modal kerja terhadap profitabilitas perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia. E-Jurnal Manajemen Unud, 5(6), 3476-3503.

Suhardi, D. A. (2007). Pergerakan harga saham sektor properti Bursa Efek jakarta berdasarkan kondisi profitabilitas, suku bunga, dan beta saham. Jurnal Organisasi dan Manajemen, 3(2), 89-103.

Suyati, S. (2015). Pengaruh inflasi, tingkat suku bunga, dan nilai tukar Rupiah /US Dollar terhadap return saham properti yang terdaftar di Bursa Efek Indonesia. Jurnal Ilmiah UNTAG Semarang, 4(3), 70-86.

Ukaegbu, B. (2013). The significance of working capital management in determining firm profitability: Evidence from developing economies in Africa. Research in International Business and Finance, 31, 1–16. https://doi.org/10.1016/j.ribaf.2013.11.005

Horne, J. C. V., & Wachowicz, J. M. (2012). Prinsip-prinsip Manajemen Keuangan. Edisi 13. Jakarta: Salemba Empat.

Vural, G., Sokmen, A. G., & Cetenak, E. H. (2012). Affects of working capital management on firm’s performance: Evidence from Turkey. International Journal of Economics and Financial Issues. 2(4), 488-495.

Weinraub, H. J., &Visscher, S. (1998). Industry practice relating to aggressive conservative working capital policies. Journal of Financial and Strategic Decision, 11(2), 11-18.

Wijaya, A. L. (2012). Pengaruh komponen working capital terhadap profitabilitas perusahaan. Jurnal Dinamika Akuntansi, 4(1), 20-26. https://doi.org/10.15294/jda.v4i1.1956

Wiradharma, M. S., & Sudjarni, L. K. (2016). Pengaruh tingkat suku bunga, tingkat inflasi, nilai kurs rupiah dan produk domestik bruto terhadap return saham. E-Jurnal Manajemen Unud, 5(6), 3392-3420.




DOI: https://doi.org/10.26905/jkdp.v22i4.2438

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534
Email: jkp@unmer.ac.id

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0