Corporate Governance and Its Relationship with the Working Capital Management in Europe

This study aims to investigate the impact of corporate governance on working capital management, which has been relatively overlooked despite its significance on corporate performance. Using the Ordinary Least Square regression model, a model was developed to assess the relationship between dependent and independent variables. Secondary data from the annual reports of 42 non-financial firms listed on the Frankfort and Oslo stock exchanges from 2017 to 2021 were collected. The dependent variable, working capital management, is indicated by cash holding, while the independent variable, corporate governance, is measured through five proxies: board meeting, board remuneration, the board size, CEO remuneration, and CEO tenure. Leverage and firm size are involved as control variables. The findings revealed that board meetings, board remuneration, CEO remuneration, and CEO tenure exhibit a positive and significant relationship with working capital management. However, board size demonstrated a negative but insignificant relationship. Additionally, the study showed that leverage has a negative relationship, while firm size has a positive relationship with working capital management. In conclusion, the study suggests that future research should focus on the financial sector to conduct comparative analyses with other sectors.