Liquidity and Profitability: An Investigation of Firm Value and Financial Performance of Thai Listed Firms During COVID-19 Pandemic
Keywords:
Profitability, Liquidity, Cash conversion cycle, Tobin’s Q, Return on equity, Return on assets, COVID-19 pandemicAbstract
The paper investigated the relationship between liquidity and profitability of the top 100 Thai companies listed in the Stock Exchange of Thailand during COVID-19 pandemic. About 18% of firms can maintain both higher profitability and higher liquidity with firms in Electronic Components sector performed the best due to the strong nationwide and worldwide customer demand and tight supply in key electronic components from COVID-19 pandemic. The statistical testing of the differences in the means of significant variables among firms classified by profitability and liquidity showed that firms that can achieve profitability-liquidity dual goals have higher sales growth, shorter cash conversion cycle and average inventory period, and higher return on equity compared to firms in other groups. The results from the multiple regression models showed that more profitable firms had higher return on equity and return on assets. Firms with higher profitability and liquidity had lower return on assets supporting the explanation that there is a trade-off between dual goals.
References
Chang, C. (2018). Cash Conversion Cycle and Corporate Performance: Global Evidence. International Review of Economics and Finance, 56, 568-581.
Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance and Accounting, 30(3-4), 573-588.
Delta Electronics (Thailand) Public Company Limited. (2020). Annual Report 2020. Retrieved October 2, 2022. Website: https://deltathailand.com/en/ir-annual
Fama, E. F., & French, K. R. (2006). Profitability, Investment and Average Returns. Journal of Financial Economics, 82(3), 491-518.
Gentry, J. A., Vaidyanathan, R., & Lee, H. W. (1990). A Weighted Cash Conversion Cycle. Financial Management, 19(1), 90-99.
Gitman, R. (1974). Estimating Corporate Liquidity Requirements: A Simplified Approach. Financial Review, 9(1), 79-88.
Haugen, R. A., & Baker, N. L. (1996). Commonality in the Determinants of Expected Stock Returns. Journal of Financial Economics, 41(3), 401-439.
Hou, K., Xue, C., & Zhang, L. (2015). Digesting Anomalies: An Investment Approach. Review of Financial Studies, 28(3), 650-705.
Jalal, A., & Khaksari, S. (2019). Cash Cycle: A Cross-Country Analysis. Financial Management, 49(3), 635-671.
Johnson, R., & Soenen, L. (2003). Indicators of Successful Companies. European Management Journal, 21(3), 364-369.
KCE Electronics Public Company Limited. (2020). Annual Report 2020. Retrieved October 2, 2022. Website: https://investor.kce.co.th/en/download/annual-report
Krungsri Research. (2020). COVID-19 Crisis: The Impact on Businesses and Choice of Policy Tools. Retrieved April 15, 2020. Website: https://www.krungsri.com/en/research/research-intelligence/ri-covid19-crisis-en
Lin, Q., & Lin, X. (2021). Cash Conversion Cycle and Aggregate Stock Returns. Journal of Financial Markets, 52, 1-27.
Microelectronics Public Company Limited. (2020). Annual Report 2020. Retrieved October 2, 2022. Website: https://www.hanagroup.com/Investor/Annual
Nobanee, H., Abdullatif, M., & AlHajjar, M. (2011). Cash Conversion Cycle and Firm’s Performance of Japanese Firms. Asian Review of Accounting, 19(2), 147-156.
Novy-Marx, R. (2013). The Other Side of Value: The Gross Profitability Premium. Journal of Financial Economics, 108(1), 1-28.
Paweewun, O. (2020, April 16). IMF: Thai GDP Down 6.7%. Bangkok Post. Retrieved April 25, 2020. Website: https://www.bangkokpost.com/business/1900795/imf-thai-gdp-down-6-7-
Shin, H. H., & Soenen, L. (1998). Efficiency of Working Capital Management and Corporate Profitability. Financial Practice and Education, 8(2), 37-45.
Thanthong-Knight, R. (2020, March 25). Thailand to Impose Broad Lockdown to Fight Novel Coronavirus. Bloomberg. Retrieved April 25, 2020. Website: https://www.bloomberg.com/news/articles/2020-03-25/thailand-to-impose-broad-lockdown-to-fight-spread-of-coronavirus
Tobin, J. (1969). A General Equilibrium Approach to Monetary Theory. Journal of Money, Credit and Banking, 1(1), 15-29.
Wang, Y. (2002). Liquidity Management, Operating Performance, and Corporate Value: Evidence from Japan and Taiwan. Journal of Multinational Financial Management, 12(2), 159-169.
Wang, B. (2019). The Cash Conversion Cycle Spread. Journal of Financial Economics, 133(2), 472-497.
Yazdanfar, D., & Öhman, P. (2014). The Impact of Cash Conversion Cycle on Firm Profitability: An Empirical Study Based on Swedish Data. International Journal of Managerial Finance, 10(4), 442-452.
Zeidan, R., & Shapir, O. M. (2017). Cash Conversion Cycle and Value-Enhancing Operations: Theory and Evidence for a Free Lunch. Journal of Corporate Finance, 45, 203-219.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Business Administration and Management Journal Review
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
บทความที่ได้รับการตีพิมพ์เป็นลิขสิทธิ์ของวารสารธุรกิจปริทัศน์
ข้อความที่ปรากฏในบทความแต่ละเรื่องในวารสารวิชาการเล่มนี้เป็นความคิดเห็นส่วนตัวของผู้เขียนแต่ละท่านไม่เกี่ยวข้องกับมหาวิทยาลัยหัวเฉียวเฉลิมพระเกียรติ และคณาจารย์ท่านอื่น ๆ ในมหาวิทยาลัยฯ แต่อย่างใด ความรับผิดชอบองค์ประกอบทั้งหมดของบทความแต่ละเรื่องเป็นของผู้เขียนแต่ละท่าน หากมีความผิดพลาดใดๆ ผู้เขียนแต่ละท่านจะรับผิดชอบบทความของตนเองแต่ผู้เดียว
