The Effect of Working Capital Adjustment Speed on Reducing the Risk of Bankruptcy by Considering the Entity Risk Management Effectiveness
محورهای موضوعی : • 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
کلید واژه: Bankruptcy Risk, Entity Risk Management, Liquidity Conversion Cycle, Working Capital Adjustment Speed.,
چکیده مقاله :
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
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)
Aflatooni, A., Karimi, J., & Khatiri, M. (2022). Access to External Financial Resources, Bargaining Power, and Speed of Working Capital Adjustment. Journal of Accounting Knowledge, 13(3), 45-63. doi: 10.22103/jak.2021.17897.3577(In Persian).
Aghaei, M.A; Norouzi, M; Bayat, M.o; Mohebkhah, M. (2015). Company life cycle, risk taking and shareholder emotions: evidence from tehran stock exchange. Journal of Accounting Advances, Shiraz University, 10 (1), pp. 1-29(In Persian).
Ahangar, N. (2020). Financial constraints and speed of working capital adjustment. Asia-Pacific Journal of Business Administration, 12(3/4), 371-385.
Alavi, SeyedMojtaba; Memarian, Mohsen (1400) auditor characteristics and probability of bankruptcy. Experimental accounting research. 11(2), 159-182(In Persian).
Arefmanesh, Z., Arefmanesh, Z., & Shokohi, H. (2022). Firm Risk Management and Firm Performance by the Role of Competitive Advantage and Financial Literacy. Financial Accounting and Auditing Research, 14(54), 79-100. doi: 10.30495/faar.2022.693670(In Persian).
Ashrafie Shahri, S. H., Vadiie, M., & Samaei Rahni, S. (2016). Optimizing Working Capital Management via Intelligent Systems for the Pharmaceutical Companies Listed on the Tehran Stock Exchange. Journal of Health Accounting, 5(1), 1-20. doi: 10.30476/jha.2016.39294(In Persian).
Azizi, S., & Jokar, H. (2021). Investigating the existence of the optimal level of working capital management and the critical point of inflation and its effect on the level of cash holding. Financial Accounting Knowledge, 8(28), 145-173. doi: 10.30479/jfak.2021.11066.2494(In Persian).
Baños‐Caballero, S., García‐Teruel, P.J., & Martínez‐Solano, P. (2010). Working capital management in SMEs. Accounting and Finance, 50(3), 511-527.
Barros, V., Falcão, P. F., & Sarmento, J. M. (2021). Are more sustainable firms able to operate with lower working capital requirements?. Finance Research Letters, 46, 102407.
Chauhan, G.S. and Banerjee, P. (2018), "Financial constraints and optimal working capital – evidence from an emerging market", International Journal of Managerial Finance, Vol. 14 No. 1, pp. 37-53. https://doi.org/10.1108/IJMF-07-2016-0131
D Tsuruta (2019)Working capital management during the global financial crisis: Evidence from Japan. Japan and the World Economy. Volume 49, March 2019, Pages 206-219.
Dadashzadeh, Ghader and Hejazi, Rezvan (2019) the relationship between the value of financial flexibility, investment efficiency and the speed of adjustment of working capital. Financial Management Strategy, 8(28), 177-196(In Persian).
Dianati Deilami, Z., Lotfi, M., & Azadbakhsh, K. (2012). The Effect of Working Capital Management on Reducing the Stock Price Crash Risk (Case Study: Companies Listed in Tehran Stock Exchange). Journal of Management Accounting and Auditing Knowledge, (1). 64-66(In Persian).
Fernandez, L., & Sanchez, P. (2023). Bankruptcy risk and financial policies: An empirical analysis.
Filbeck, G. and T.M. Krueger, 2005. An analysis of working capital management results across industries. American Journal of Business, 20(2). 11-20.
Flannery, M.J, Rangan, K.P. (2006). Partial adjustment toward target capital structures. Journal of Financial Economics, 79(3), pp.469-506.
Garikai, Mandipa, and Athenia Bongani Sibindi. 2022 Financial Performance and Working Capital Management Practices in the Retail Sector: Empirical Evidence from South Africa. Risks 10: 63.
Ghaderi, S., Lashgari, Z., Tariverdi, Y., & Kaighoadi, A. (2020). Enterprise Risk Management Model and Implications for Effective Control of Accounting and Economic Performance of the Company. Empirical Studies in Financial Accounting, 17(65), 139-173. doi: 10.22054/qjma.2019.46862.2060(In Persian).
Gordon, Lawrence A. Loeb; Martin, P; Tseng, CY. (2009). Enterprise risk management and firm performance: a contingency perspective", J. Account. Public Policy(28),PP. 301–327.
Habib, A.M. and Kayani, U.N. (2022), "Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE", Corporate Governance, Vol. 22 No. 7, pp. 1567-1586. https://doi.org/10.1108/CG-12-2021-0440
Jiang, H., Jia, J., & (Ellie) Chapple, L. (2023). Enterprise risk management and investment efficiency: Australian evidence from risk management committees. Australian Journal of Management, 0(0). https://doi.org/10.1177/03128962221144513
Kordestani, G., Tatli, R., & Kosari Far, H. (2014). The Evaluate ability of Altman adjusted Model to Prediction Stages of Financial Distress Newton and Bankruptcy. Journal of Investment Knowledge(3). 83-93(In Persian).
Nastiti, P. K. Y., Atahau, A. D. R., & Supramono, S. (2019). Working capital management and its influence on profitability and sustainable growth. Business: Theory and Practice, 20, 61-68. https://doi.org/10.3846/btp.2019.06
Norouzi, M., & Aflatooni, A. (2019). Optimal Level of Working Capital Management and Financial Constraint. Empirical Research in Accounting, 9(1), 1-22. doi: 10.22051/jera.2017.8410.1150(In Persian).
Öztekin, Ö. (2015). Capital structure decisions around the world: Which factors are reliably important? Journal of Financial and Quantitative Analysis, 50(3), 301-323.
Rostami, V., Mehravar, M., & Kargar, H. (2022). The effect of risk management on the speed of adjusting financial leverage in the life cycle stages of companies. Journal of Accounting Advances, 14(1), 59-88. doi: 10.22099/jaa.2022.44253.2256(In Persian).
Soleimany Amiri, G., & Gerveie, P. (2017). The Impact of Managerial Overconfidence on Systematic and Unsystematic Risk. Journal of Accounting Advances, 9(1), 99-124. doi: 10.22099/jaa.2017.4213(In Persian).
Tariverdi, Y., & Damchi Jelodar, Z. (2012). The Relation between Enterprise Risk Management and Firm Performance. Financial Accounting and Auditing Research, 4(15), 43-62(In Persian).
Van, H. T. T. ., Hung, D. N. ., Van, V. T. T. ., & Xuan, N. T. . (2019). Managing Optimal Working Capital and Corporate Performance: Evidence from Vietnam. Asian Economic and Financial Review, 9(9), 977–993. https://doi.org/10.18488/journal.aefr.2019.99.977.993
Zohdi, M., Valipor, H., & SHahabi, A. (2011). Working capital and enterprise risk policies. Financial Accounting and Auditing Research, 2(8), 187-210(In Persian).
