Working Capital Behavior and Risk: Empirical Study of Manufacturing Companies in Indonesia

This study aims to examine empirically the aggressive behavior of investment in working capital. Empirically, the research was carried out for companies in industrial sectors listed on the Indonesia Stock Exchange. Data consist of panel data of 2012-2017 totaling 157 samples after screening for outliers and normality. Structural equation modeling (SEM) is employed to test the recursive model. The results reveal that investment aggressiveness is influenced by sales growth, that is, the higher the aggressiveness of working capital investment, the lower the risk of liquidity. Furthermore, the lower liquidity risk has an impact on the lower operational risk. The lower the operational risk, the lower the profitability, and the lower the value of the company or the higher the financial risk. The findings are supported by previous studies which show that the higher the liquidity risk, the lower the financial risk. In short, the aggressiveness of working capital does not create value for shareholders.