The Relationship between Working Capital Management and Profitability of Listed Automobile Companies in Japan Stock Exchange Market: Moderating Effect of Market Share

Abstract

This study examined the moderating effect of market share on the relationship between working capital (CCC) and profitability in the industrial sector of Japan's automobile firms listed on the Tokyo Stock Exchange. The data were collected from the Thomson Reuters Eikon database spanning from 2003 to 2022. The study employed various analytical methods, including Fixed Effect, Random Effect, Generalized Method of Moments (GMM), and Fully Modified Ordinary Least Squares (FMOLS), to estimate the moderating effect of market share on the relationship between CCC and profitability. The findings of this study revealed a statistically significant negative impact of market share (MS) on the relationship between CCC and profitability. These results suggest that the Japanese automobile industry may not adequately prioritize market share, potentially overlooking crucial customer needs and preferences. Consequently, this approach may lead to missed growth opportunities, such as the failure to introduce new products or expand into emerging markets. Failure to seize these growth opportunities could hinder long-term profitability. Thus, it is crucial for companies to capitalize on growth prospects to ensure sustained profitability. The insights gained from this study can contribute to enhancing working capital efficiency, refining market share strategies, and informing investor decision-making. By refining their working capital strategies and aligning their actions with their market position and objectives, companies can improve profitability and make informed decisions that are aligned with their overall business goals.