The present thesis tries to figure out, if the Working Capital Management of German companies is reactive to changing interest rates for their refunding or if it is really a pro-active improvement since the beginning of the 2000s as claimed by the literature. After a theoretical definition of Working Capital, its functions, goals and its relationship to the management process, Working Capital will be set into a context of company crises to lead to the central object of investigation, the Global Financial Crisis. With a quantitative analysis via DataStream of the companies currently listed in the DAX, MDAX and SDAX (N=130) it will be examined, if the credit crunch for companies in the Global Financial Crisis and the easy refunding possibilities afterwards due to the easy money policy of the European Central Bank had effects on the quality of the Working Capital Management. The analysis of the data via SPSS will show, that the possibilities of refunding indeed influence this quality, whereby the intensity of the reactionary behaviour of the companies depends mainly on the object of cognition, which is in this thesis examined by the parameters size, age and industry sectors, so that the results could serve as a basis for further management research.
Table of Contents
1 Introduction
2 Literature Review
2.1 Object of Working Capital Management
2.1.1 Working Capital
2.1.2 Management
2.1.3 Working Capital Management
2.2 Company Crises
2.2.1 Crisis Process
2.2.2 Crises Causes
2.2.3 Early Detection and Intervention
2.3 Working Capital Management during Crisis
2.3.1 Working Capital Management as a Cause, Indicator and Counteragent
2.3.2 Working Capital Management during the Global Financial Crisis
2.3.3 Working Capital Management after the Global Financial Crisis
3 Methodology
4 Results of Empirical Research
4.1 Overall Results
4.2 Special Observations regarding the Object of Cognition
4.2.1 Industry Sectors and the Relationship to Working Capital Management
4.2.2 Company’s Size and the Relationship to Working Capital Management
4.2.3 Company’s Age and the Relationship to Working Capital Management
5 Discussion
6 Conclusion and Forecast
Research Objectives and Themes
The thesis investigates whether the Working Capital Management (WCM) of German companies has been reactive to changing interest rates or pro-active since the early 2000s. By analyzing 130 companies listed in the DAX, MDAX, and SDAX, the study seeks to determine if the credit crunch during the Global Financial Crisis and subsequent easy-money policies influenced WCM quality, taking into account firm size, age, and industry sector.
- Theoretical foundation of Working Capital (WC) and its role in crisis management.
- Quantitative empirical time comparison of WCM quality from 2004 to 2014.
- Analysis of the impact of the Global Financial Crisis and ECB monetary policy.
- Evaluation of firm-specific parameters including size, age, and industry sector.
Excerpt from the Book
2.1.1 Working Capital
This chapter describes the academic approaches to the WC, first in general, later more detailed and suitable to this thesis. In the second part, after shortly defining in the next part (2.2.2) what the general tasks and obligations of management are, the connection between WC and management to the term WCM will be explained with a target hierarchy (2.2.3).
The term WC in the financial sphere of a company is a generally accepted definition and can be viewed from two perspectives: From the cash-flow orientated, dynamic perception WC is considered as a circuit of liquid assets with focus on the period of time between outgoing and incoming payments. The measurement method is the Cash Conversion Cycle which is often used to measure the effect of WCM on profitability of companies. However, the balance sheet orientated static view considers the current assets on the asset side and the current liabilities on the liabilities side of a balance sheet.
For the introduced goals of this empirical research to see changes of WCM during and after the Global Financial Crisis in duration of eleven years, the balance sheet orientated view is more suitable. This is primarily caused by the fact that the cash-flow orientated perception needs more information, is more dependent from other factors, is more short-term orientated and in addition partly needs internal data of companies as, for example, their operational goals, which is not readable in the balance sheet or the profit and loss account of an annual financial statement. Nevertheless, the aims regarding WC, which will be described later, should be the same, and the analysis with the CCC can be viewed as a short-term instrument which indicates anyway the obvious results in the balance sheet so that the focus on the balance sheet orientated approach should not have major effects.
Summary of Chapters
1 Introduction: Provides the research rationale, objectives, and the context of Working Capital Management in German companies against the backdrop of the Global Financial Crisis.
2 Literature Review: Defines Working Capital and WCM theoretically, discusses company crisis processes, and sets the stage for analyzing the financial crisis impact.
3 Methodology: Details the empirical approach, data source (DataStream), sample size (N=99), and the analytical models used to measure WCM quality.
4 Results of Empirical Research: Presents the quantitative findings and statistical analysis of WC-Ratio trends across various industry sectors, firm sizes, and ages.
5 Discussion: Interprets the empirical results within the theoretical framework, highlighting the influence of firm characteristics and macroeconomic conditions.
6 Conclusion and Forecast: Synthesizes the main findings, confirms the reactive nature of German WCM, and provides a forward-looking perspective on WCM's role in future financial stability.
Keywords
Working Capital Management, WCM, Working Capital, Global Financial Crisis, Germany, Liquidity, Profitability, Credit Crunch, European Central Bank, DAX, MDAX, SDAX, Financial Crisis, Management Accounting, Corporate Finance.
Frequently Asked Questions
What is the core focus of this research?
The research examines whether the Working Capital Management of German companies is reactive to market conditions, specifically interest rates and the Global Financial Crisis, or whether it follows a pro-active improvement strategy.
What are the primary themes discussed?
The thesis covers theoretical WCM definitions, the process of company crises, the impact of the Global Financial Crisis, and empirical analysis of German companies listed in leading stock indices.
What is the central research question?
The study investigates whether the management of WC in Germany between 2004 and 2014 was rather reactionary than pro-active in response to external economic pressures.
Which methodology is applied?
The author performs a quantitative empirical time comparison using data from Thomson Reuters DataStream and statistical analysis via SPSS to evaluate changes in WCM quality.
What does the main body address?
The main body integrates theoretical literature with an empirical study of 99 German companies, examining WCM quality across different time periods, industries, firm sizes, and firm ages.
Which keywords describe this work?
Key terms include Working Capital Management, Financial Crisis, liquidity, profitability, German stock indices (DAX, MDAX, SDAX), and corporate finance.
How does firm size affect the WCM results?
The thesis suggests that larger companies (DAX) may have more stable management processes, whereas smaller companies (SDAX, MDAX) showed higher WC-Ratios, potentially indicating less experience or competence in managing working capital.
What conclusion does the author reach regarding the "pro-active" literature claim?
The author concludes that WCM in German companies is more reactive than pro-active, as evidenced by changes in management effort correlating significantly with external economic indicators rather than a continuous pro-active improvement.
- Arbeit zitieren
- Christopher Thees (Autor:in), 2015, Working Capital Management during and after the Global Financial Crisis. Evidence from Germany, München, GRIN Verlag, https://www.grin.com/document/310122
