CORPORATE GOVERNANCE AND WORKING CAPITAL MANAGEMENT: EVIDENCE FROM CANADA

Authors: Dan Lin & Lu Lin

ABSTRACT

This study examines the impact of corporate governance on working capital management based on a sample of Canadian companies in the S&P/TSX Composite Index. The study adopts two measures for working capital management, including cash holdings and cash conversion efficiency. The results show that cash holdings are not correlated with corporate governance variables while cash conversion efficiency is significantly negatively associated with the shareholding and compensation index and positively associated with the disclosure index. Therefore, this study finds some evidence of the relationship between corporate governance and working capital, but the direction of the relationship is mixed depending on the governance attributes measured.

Keywords: Corporate governance, working capital management, cash holdings, cash conversion efficiency

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