Impact of Corporate Governance on Working Capital of Cement Companies of Pakistan

Abstract

This research investigates the influence of corporate governance on working capital management within the cement industry of Pakistan. The sample included 13 cement companies listed on the Pakistan Stock Exchange. Data from year 2019 to 2023 is used in this study. This study employs quantitative analysis to examine the relationship between corporate governance variables, such as board size, internal audit team size, CEO duality and external audit quality. Elements of Working Capital Management (WCM) include accounts payable turnover, inventory turnover, and accounts receivable turnover. The results of the study revealed that audit quality and internal audit team size are the key elements of Corporate Governance (CG) affecting receivable turnover period. The result revealed more staffed internal audit team leads to lower receivable turnover in days. While higher external audit quality also leads to lower receivable turnover days. Similarly, internal audit team size is significant in effecting inventory turnover in the cement industry of Pakistan. More staffed internal audit lead in crucial in identifying weakness in the inventory management leading to lower inventory turnover period.