Relationship between Working Capital Management and the Performance of Firm in Different Business Cycles

Abstract

Working capital management is one of the issues that plays an important role in the management structure of an organization and as one of the main force moving forward organizations, it is important to obtain huge economic benefits. This study focused on the relationship between working capital management and the performance of firm in different business cycles. A sample consist of 80 companies listed in Tehran Stock Exchange from 2002 to 2013 have been selected. In this study, the cash conversion cycle is considered as a measure of working capital management, which consists of days account receivable, days inventory and days account payable. Hypotheses of this study were analyzed using panel method data and the results show that there is a significant negative relationship among the management of working capital and firm performance. Among the components of cash conversion cycle, only day's account receivable has negative and significant relationship with firm performance. The results also show that the various business cycles do not modify the relationship between working capital management and the performance of companies.

Unveiling The Effectiveness of Working Capital Management on Firm Performance: The Moderating Role of Firm Size

“…It is advantageous for a business to pay its suppliers later if the investment projects offer a better rate of interest than the cost of funding its payables. At the same time, some researcher shows a negative association (Kasozi, 2017;Pakdel and Ashrafi, 2019). The negative association indicated that if the premise is taking longer to reimburse, suppliers can result in disrupted relationships with vendors and possibly liquidity concerns.…”

“…Rising bad debts and write-offs can result from ineffective collections and credit procedures, which can significantly affect profitability (Munene and Tibbs, 2018). Existing literature concerning the accounts receivables days and firm profitability concluded that accounts receivables days negatively influence the business profitability (Gonçalves et al, 2018;Pakdel and Ashrafi, 2019;Nguyen et al, 2020). The business having fewer accounts payable days has better solvency, which indicates that it is taking the less working capital of other corporations, which leads to improving the firm reputation.…”

أثر العلاقة التفاعلية بين المرونة المالية وإدارة رأس المال العامل علي الأداء المالي للشركات: دليل تطبيقي من البيئة المصرية

“…‫الدراسات‬ ‫ضوء‬ ‫في‬ ‫رئيسة‬ ‫مؤشرات‬ ‫أربعة‬ ‫علي‬ ‫المالية‬ ‫المرونة‬ ‫قياس‬ ‫في‬ ‫الحالية‬ ‫الدراسة‬ ‫اقتصرت‬ ( ‫الصلة‬ ‫ذات‬ ‫السابقة‬ Marchica and Mura, 2010;Bancel and Mittoo, 2011;Arslan-Ayaydin et al, 2014;Rapp et al, 2014;Rahimi and Mosavi, 2016;Mahmood et al, 2018;Raza et al, 2021;Wu et al Hassan et al, 2014;Aktas et al, 2015;Tahir and Anuar, 2016;Altaf and Shah, 2017;Moussa, 2018;Pakdel and Ashrafi, 2019;Kayani et al Rahimi and Mosavi, 2016;Mahmood et al, 2018;Moussa, 2018;Pakdel and Ashrafi, 2019;Raza et al, 2021;Wu et al, 2023;Kayani et al Modigliani and Merton, 1958;Donaldson,1961;Jensen and Meckling, 1976;Myers and Majluf, 1984;Graham and Harvey,2001;Raheman, 2007;De Angelo and De Angelo,2007;Banos-Caballero et al, 2016 Alaa.zalat@commerce.menofia.edu.eg…”

“…‫المالي‬ ‫األداء‬ ‫مقاييس‬ ‫أحد‬ ‫استخدام‬ ‫تم‬ ‫وقد‬‫ا‬ ‫الربح‬ ‫مقدار‬ ‫عن‬ ‫يعبر‬ ‫والذي‬ ‫التقليدية‬ ‫من‬ ‫قياسه‬ ‫ويتم‬ ‫الشركة،‬ ‫أصول‬ ‫في‬ ‫إستثماره‬ ‫تم‬ ‫واحد‬ ‫جنيه‬ ‫لكل‬ ‫لمحقق‬ ‫األصول‬ ‫علي‬ ‫العائد‬ ‫معدل‬ ‫خالل‬ ( ‫الصلة‬ ‫ذات‬ ‫السابقة‬ ‫بالدراسات‬ ‫ورد‬ ‫ما‬ ‫ضوء‬ ‫في‬Rahimi and Mosavi, 2016;Mahmood et al, 2018;Moussa, 2018;Pakdel and Ashrafi, 2019; …”

Determinants of Working Capital Management: A Case of Listed Manufacturing Companies in Tanzania

“…Attaining this condition, the management needs to be strategic. Being strategic, the financial management unit of the firm requires being adapted to factors influencing surplus working capital [27]. Working capital management is a crucial aspect to be maintained for sustainable financing of the firm operations [28].…”