Bankers’ Relationships and Effective Cash Management: A Lesson from Malaysian Property Developers

By Noorhayati Mansor and Sharifah Hazariah Jap.

Published by The Organization Collection

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Article: Print $US10.00
Article: Electronic $US5.00

Similar to other countries, construction industry in Malaysia plays a major role in the growth of its economy (Parid Wardi Sudin, 2002). However, empirical studies in this area are at best, very limited. Home building represents a major employer of the labour force and carries diverse economic effects (Harris & Arku, 2006). The increased in capital allocation for housing by 35% to RM9,452 million under the Ninth Malaysia Plan further highlights its importance. According to Peer and Rosental (1982) and Singh and Lakanathan (1992), lack of liquidity for supporting daily activities contribute to failures of construction companies. The excessive level of construction business failures and their association with financial difficulties has increased the importance of cash flow forecasting models (Khosrowshahi and kaka, 2007). A study by Zhang (2006) indicates that firm characteristics are highly related to cash flow management. Accordingly, this study examines the relationship between effective cash management and six (6) independent variables which represent (i) human-related factors; (ii) system related factors; (iii) and external factors. The findings provide evidence that manager’s knowledge and attitude contributes to effective cash management and thus, consistent with Ottoson (1997), Mudambi and Treichel (2005) and Lazaridis (2006). Contrary to Soobaroyen & Poorundersing (2008), the results indicate that the source of system has no effect on the dependent variable. Interestingly, relationship with bankers demonstrates no impact on effective cash management and thus, fails to support King (1994). Also, consistent with Ottoson (1997), continuous planning with feedback is a significant determinant of effective cash management but suppliers’ relationship documents a negative effect on cash management. The paper concludes with discussion of findings and suggestions for future research.

Keywords: Construction Industry, Ninth Malaysia Plan, Liquidity, Business Failures, Effective Cash Management, Bankers’ Relationships

International Journal of Knowledge, Culture and Change Management, Volume 9, Issue 4, pp.81-92. Article: Print (Spiral Bound). Article: Electronic (PDF File; 1.177MB).

Dr. Noorhayati Mansor

Director, UMS Accounting Centre, Universiti Malaysia Sabah, Kota Kinabalu, Sabah, Malaysia

In-charge of designing and improving the accounting curriculum to ensure compliance with the national and global standard practices. Also involve in various activities at the national level in promoting interests in the accounting education. A former Council member of the Malaysian Institute of Accountants having served the maximum period of 4 years. Currently serve as a Trustee of the Malaysian Accountancy Research and Education Foundation. Areas of interest include strategic management accounting, corporate finance and operations management.

Sharifah Hazariah Jap

Kota Kinabalu, Sabah, Malaysia


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