Impact of the Aggressive Working Capital Management Policy on Firm's Profitability and Value: Study on Non-Financial Listed Firms in Indonesia Stock Exchange

Effective working capital management policies is crucial to the company's long survival. The working capital policy is concerned with determining the aggregate amount of a firm's current assets and current liabilities is required by a firm. This study investigates the impact of the aggressive working capital management policy on firm's profitability and value of non-financial listed firms. This study collected the data from 393 non-financial Indonesian listed companies in 2014. The data were analyzed by using multiple linear regression. The findings have established that aggressive working capital policy has a significant influence on the company profitability, however, it has no significant impact on the market value of the company. Moreover, this study found that aggressive investment policy (AIP) has a positive relationship with the profitability. Surprisingly, the finding showed that the aggressive financing policy (AFP) has a negative impact on profitability. Accordingly, to increase the company's market value, the manager must increase profitability by optimizing investment on current asset and by adding the proportion of long-term financing in working capital. In addition, this study employed leverage ratio and firm's size as the control variables. Finally, this study has also discussed some limitations and future research.