Abstract We provide the first empirical study of the relationship between corporate working capital management and shareholders’ wealth. Examining US corporations from 1990 through 2006, we find evidence that: the incremental dollar invested in net operating working capital is worth less than the incremental dollar held in cash for the average firm; the valuation of the incremental dollar invested in net operating working capital is significantly influenced by a firm’s future sales expectations, its debt load, its financial constraints, and its bankruptcy risk; and the value of the incremental dollar extended in credit to one’s customers has a greater effect on shareholders’ wealth than the incremental dollar invested in inventories for the average firm.