Research Methodology:

Introduction:

This chapter sets to explain the research design, the population of interest, the basis of sample

selection, method of data collection, the statistical techniques of analysis to be used and

description of the variables of the study.

Research design:

To analysis the impact of corporate governance on working capital management the study uses

the following methods: (1) Descriptive statistical analysis will used for the feature of the data in

the study such as mean and standard deviation of each variables; (2) correlation analysis, which

measure the degree of relationship between all the variables and will explores whether or not the

relationship between variables is positive or negative ; and (3) regression analysis is used to

measuring the change in dependent variables by change in each unit of independent variables .

The study also adopted a panel study in which data was gathering for many entities over the

period 2010 to 2014.

Population of interest:

According to Jacobs and Razarich (1989), target population refer to all member of a real

hypothetical set of people, event ,object to which we to generalize results of the research.

Population of interest in this research will be consisting of 100 index listed firm at KSE that

operating in Pakistan. Karachi stock exchange is the international stock market, which is the

biggest center of trading activities in Pakistan. The kse 100 index was introduced in November

1991 with base value of 1000 points. The index comprises of 100 companies selected on the
basis of the highest free –float capitalization , which capture over 80 % of the total free –float

capitalization of the companies listed in stock exchange ( Pakistan economic survey 2004 ).

Sample selection:

According to Mugenda (2003) a sample is a subject of population .sampling on the other hand

refers to selection of individuals for observation intended to yield some knowledge about

population of concern .sampling has the advantage has reduce the cost of research ,ensuring

faster data collection as well as improve accuracy and quality of data (Meshack 2015).according

to the Gay and Airasian(2000) stated that a sample of at least 10 % is adequate enough to provide

the needed sample from the population for an intended research. The sample of the study is 25

listed manufacturing firms of Pakistan.these sample size will be selected from 100 index of kse

Karachi stoch exchange .further from these 100 index 25 manufacturing firms will br selected on

the basis of availability and accessibility of data, which is 25 percent of the population. the

period range of sample size will be from 2010 to 2014.

Method of data collection:

The secondary data will be required to perform the research .these secondary data will be

collected from annual report of 25 listed manufacturing firms of krachi stock exchange in

pakistan. Similarly, from these annual report data of working capital management and corporate

governance will be collected from financial statement and company information

sequentially .balance sheet and income statement of the financial statement will be studied get

information on level of account receivable, account payable ,account inventory and sales. And

company information will be study to get information of board size, board meeting and board

committee of annual reports.

Statistical techniques of analysis :

As mentioned above that Multiple regression analysis will be applied to the data to examine the

effect of corporate governance on working capital management. Pearson correlation will be used

to calculate relationship between the different variables use in the study. For this purpose

statistical package for social science (spss) will be used to analyze the data. To test the

hypothesis multiple regression test will be conducted with significant test value 5%. Which most

commonly used for the establishment of rejection rule for the null hypothesis, and determined

whether probability for the observe correlation happened by chance or not. Further the null

hypothesis will be rejected if the p value (sig value) becomes less than 5 % otherwise it would be

accepted.

Description of Variables:

Dependent variables:

Accounts Receivable Period

Accounts receivable period measures the number of days it takes to collect cash from debtors.

(Fried et al, 2003) state that days sales in receivables measure the effectiveness of the firm’s

credit policy. It indicates the level of investment in receivables needed to maintain the firm’s

sales level and is measured as follows:

Accounts Receivable Period (ARP) = (Accounts Receivables / Sales) X 365days

Inventory Holding Period

Inventory holding period measures the number of days inventory is held by the company

before it is sold. The less number of days sales in inventory indicates that inventory does not

remain in warehouses or on shelves but rather turns over rapidly from the time of acquisition

to sale (Fried et al, 2003). This ratio is measured as follows:

Inventory Holding Period (IHP) = (Inventory / Cost of goods sold) X 365days

Accounts Payable Period

Accounts Payable Period (APP) measure the number of days a firm takes to pay its suppliers.

Thus, this ratio represents an important source of financing for operating activities. The ratio

Is measured as follows:

Account Payable Period (APP) = (Accounts Payable / Cost of goods sold) X 365 days

Independent variables:

Board size: Board size refers to the number of all directors in a board of a firm.

Board meeting: Board meeting refer to the number of meeting holding during in a year of a firm.

Board committee: Board committee refers to the number of committee holding during in a year.