The Impact of Internal Control System and Working Capital Management on Financial Performance at Supermarket in Dili, Timor-Leste
Abstract
The objective of this study was to investigate the relationship between internal control and capital management systems on financial performance. The study was carried out using a sample of 50 supermarkets in Dili, and the participants were owners or managers of these supermarkets. Data was collected using a questionnaire, and the Multiple Linear Regression technique was employed to analyze the data and test the hypotheses using SPSS 21. The study reveals that the internal control system (measured by environmental control indicators, activity control, and risk assessment) and working capital management (measured by stock management, credit management, cash management, and debt management) have a significant positive impact on the financial performance of supermarkets in Dili, Timor-Leste. The findings suggest that effective implementation of an internal control system and efficient management of working capital can enhance the financial performance of supermarkets. However, the study also indicates that the information system indicator within the internal control system does not have a significant impact on the financial performance of supermarkets in Dili, Timor-Leste. The findings of this study are valuable for advancing research on internal control systems in supermarkets in developing countries. Specifically, the study examines the impact of environmental control indicators, activity control, information systems, risk assessment, and working capital management (as measured by stock management indicators, credit management, cash management, and debt management) on financial performance (as measured by profitability, ROE, and liquidity). The study highlights the importance of effective internal control systems and working capital management in improving financial performance in supermarkets. However, the study is limited in that it relies solely on a questionnaire for data collection. Future research should consider using interviews to obtain more reliable and valid data.
Downloads
References
Abuzayed, B. (2012) ‘Working capital management and firms ’ performance in emerging markets : the case of Jordan’, 8(2), pp. 155–179.
Ahmed, A. M. and Muhammed, A. A. (2018) ‘Internal Control Systems and its Relationship with the Financial Performance in Telecommunication Companies “ A Case Study of Asiacell ” With the Financial Performance in “ A Case Study of Asiacell”’, (August), pp. 6–18.
Ahmed Akram Mohamed (2019) ‘Determinants of Supermarket Performance in Dar-Es- Salaam , Tanzania’.
Belo, T. F. (2019) ‘The Relevance of Microcredit and its Impact on East Timor MSEs and Poverty Reduction’, pp. 1–95.
Boisjoly, R. P., Conine, T. E. and McDonald, M. B. (2020) ‘Working capital management: Financial and valuation impacts’, Journal of Business Research. Elsevier, 108(November 2018), pp. 1–8.
Donati, F. (2019) ‘The Effect of Internal Control on the Financial Performance of Mining Industry in Tanzania : A Case of Tanzanite one Compony Master of Business Administration the University of Dodoma’.
H. Kent Baker, Satish Kumar, H. P. S. (2019) ‘Working capital management : evidence from Indian SMEs’, Small Enterprise Research. Taylor & Francis, 26(2), pp. 143–163.
Jain, P., Vyas, V., & Chalasani, D. P. S. (2016). Corporate social responsibility and financial performance in SMEs: A structural equation modelling approach. Global Business Review, 17(3), 630-653.
Bett, J. C., & Memba, F. S. (2017) ‘Effects of Internal Control on the Financial Performance of Processing Firms in Kenya: A Case of Menengai Company’, International Journal of Recent Research in Commerce Economics and Management (IJRRCEM), 4(1), pp. 105–115.
Kabuye, F. et al. (2019a) ‘Internal control systems, working capital management and finacial performance of supermarkets’, cogent Business & Management, pp. 1–28.
Kabuye, F. et al. (2019b) ‘Internal control systems , working capital management and financial performance of supermarkets’, Cogent Business & Management. Cogent, 6(1), pp. 1–18.
Kassim, H. (2014) ‘The Relationship between Working Capital Management and Financial Performance of Supermarkets in Nairobi County’, pp. 1–62.
Keith, T. Z. (2019). Multiple regression and beyond: An introduction to multiple regression and structural equation modeling. Routledge.
Kiptoo, I. K. (2017) ‘Working Capital Management Practices and Financial Performance of Tea Processing Firms in Kenya’, pp. 1–65.
Masocha, R. and Dzomonda, O. (2016) ‘The Mediating Role of Effective Working Capital Management on the Growth Prospects of Small and Medium Enterprises in Polokwane Municipality’, (2010), pp. 157–165.
Mtani, B. P. and Masanja, N. M. (2018) ‘The Impact of Working Capital Management on Financial Performance of Supermarkets in Arusha City - Tanzania’, International Journal of Research and Innovation in Social Science (IJRISS), 2(12), pp. 94–101.
Nazir, M. S. and Afza, T. (2009) ‘Impact of Aggressive Working Capital Management Policy on Firms ’ Profitability’, (July), pp. 19–31.
Nyakundi, D. O., Nyamita, M. O. & Tinega, T. M. (2014) ‘Effect of Internal Control Systems on Financial Performance of Small and Medium Scale Business Enterprises in Kisumu City, Kenya’, International Journal of Social Sciences and Entrepreneurship, 1(11), pp. 1–15.
Odek, R. and Okoth, E. (2019) ‘Effect of Internal Control Systems on Financial Performance of Distribution Companies in Kenya’, Research Journal of Finance and Accounting, 10(November), pp. 11–32.
Ogetange, F. N. (2017) ‘Effect of Internal Control Systems on Financial Performance of Supermarkets in Kajiado County’, (November), pp. 1–66.
Serve IP (2020) Total number of supermarkets in Dili, Timor-Leste. Retrieved from: https://serve.gov.tl/. Accesed on March 2020.
Talonpoika, A. M. et al. (2016) ‘Defined strategies for financial working capital management’, International Journal of Managerial Finance, 12(3), pp. 277–294.
Thuku, N. W. (2019) ‘Effect of Value Chain Management Practices on Performance of Medium and Large Scale Retail Outlets in Nakuru County, Kenya’, pp. 1–89.
Zailani, S. et al. (2019) ‘The in fl uence of halal orientation strategy on fi nancial performance of halal food fi rms Halal culture as a moderator’, Journal of Islamic Marketing, pp. 1–19.
Copyright (c) 2023 Timor Leste Journal of Business and Management
This work is licensed under a Creative Commons Attribution 4.0 International License.