Investing in working capital: a comparison of Canadian and U.S. firms

Abstract

This study investigates empirically the working capital policies of Canadian versus U.S. firms. Using a sample of 477 Canadian and 2,843 U.S. industrial firms over the period 1989-2009, we confirm significant differences between working capital practices of Canadian and U.S. firms, despite their geographical proximity and cultural similarities. Canadian firms, on average, invest less in working capital than their U.S. counterparts, and the difference is significant and persistent. This finding is confirmed by regression analysis where various determinants of working capital are used as control variables, and the country dummy for Canada turns out to be negative and highly significant.