Working Capital Management during Financial Crisis: Evidence from Japan

Author Name TSURUTA Daisuke (Nihon University)
Creation Date/NO. March 2017 17-E-045
Research Project Study on Corporate Finance and Firm Dynamics
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First Draft: March 2017
Revised: March 2019


This paper demonstrates the adjustment speed of firm working capital and the relationships between working capital and firm performance in Japan during the global financial crisis. Using quarterly firm-level data, we find that the adjustment of working capital was weaker during the crisis. Moreover, the negative relationship between excess working capital and firm performance became more significant during the crisis, especially for larger firms. However, this crisis-related working capital-firm performance effect does not appear to persist for very long, because to finance any excess working capital, firms borrow from banks and reduce their internal cash both during and outside periods of crisis.

Published: Tsuruta, Daisuke, 2019. "Working capital management during the global financial crisis: Evidence from Japan," Japan and the World Economy, Vol. 49, pp. 206-219