The Effect of Working Capital Management indicators on Firm Value and Stock Return Volatility

Subject Areas : Journal of Capital Market Analysis

mohamad  mohamadi ¹ (خیابان بخارست خیابان ششم پلاک 32طبقه اول)

Received: 2022-06-06 Accepted : 2022-09-13 Published : 2022-08-23

Keywords: Cash conversion cycle, Firm Value, Stock Return Volatility, Working Capital Management,

Abstract :

One of the most important goals of companies is to create value and increase wealth for shareholders. Working capital management includes policies and processes that, if well designed and implemented, can lead to a positive impact on the value of the firm and reduce in stock returns volatility. Accordingly, the purpose of this study is to determine the effect of working capital management indicators on firm value and stock return volatility. The sample of this study consists of 102 listed companies in Tehran Stock Exchange during 2011 to 2019. In order to test the hypotheses, linear regression model and the panel data method have been used. The results of testing hypotheses indicated that there is a negative and significant relationship between the value of the firm and net working capital and the cash conversion cycle. Therefore, with an optimal working capital management and a reduction in the cash conversion cycle, the value of the firm can be increased. Results also showed that net working capital has no effect on stock return volatility.