The Effect of Working Capital Adjustment Speed on Reducing the Risk of Bankruptcy by Considering the Entity Risk Management Effectiveness

Subject Areas : • Emerging technology in the field of Accounting and its future

Vahab Rostami ¹ , Mehdi Mohammadi ² , Hamed Kargar ³

1 - Assistant Professor, Department of Accounting, Payam Noor University, Tehran, Iran. (CorrespondingAuthor)
2 - Assistant Professor, Department of Accounting, Zanjan Branch, Islamic Azad University, Zanjan, Iran
3 - Master of Accounting at Payame Noor University

Received: 2023-09-06 Accepted : 2023-09-18 Published : 2023-09-22

Keywords: Bankruptcy Risk, Entity Risk Management, Liquidity Conversion Cycle, Working Capital Adjustment Speed.,

Abstract :

Objective: The current research is willing to trace the effect of the speed of adjustment of working capital in reducing the risk of bankruptcy with emphasis on the effectiveness of the Entity Risk Management (ERM) Methodology:: In this regard, a sample of 124 companies listed in Tehran Stock Exchange during the years 2013-2022 which selected on the pattern of systematic elimination and finally the research hypothesis tested with aid of multiple linear regression based on panel data. Results: The results of the hypothesis test showed there is revers relation between the speed of adjustment of working capital and the risk of bankruptcy and the company’s risk management also intensifies this relationship. Innovation: The current research provides useful evidence for company managers and capital market agents that with better management Short-term working capital and achieving optimal working capital can control financial crises and the risk of bankruptcy reduction and the formation of a good risk committees in the companies play an important role in this regard by implying company risk management

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