The Moderating Role of Firms characteristics on the Relationship between Working Capital Management and Financial Performance

محورهای موضوعی : Financial Accounting

Hassan Zalaghi ¹ (Department of Accounting, Faculty of Economic and Social Sciences, Bu-Ali Sina University, Hamedan, Iran)
Maryam Godini ² (Department of Accounting, Faculty of Economic and Social Sciences, Bu-Ali Sina University, Hamedan, Iran)
Kefsan mansouri ³ (Department of Accounting, Faculty of Economic and Social Sciences, Bu-Ali Sina University, Hamedan, Iran)

تاریخ دریافت : 1397/10/04 تاریخ پذیرش : 1397/12/02 تاریخ انتشار : 1397/12/10

کلید واژه: Working Capital, Financial Performance, Firm characteristics, Cash conversion cycle,

چکیده مقاله :

Optimal working capital management can positively effect on the Firm performance, but this relationship can be affected by major characteristics of the firm, making an important subject for research. This research investigates the moderating role of firm characteristics on the relation between working capital management and financial performance of the firms listed in TSE during 2008 – 2017 period. Based on existing researches, three characters are considered as moderating variables in this research include firm size, debt ratio, and Governmental ownership. Financial performance and working capital management are measured using return on assets (ROA) and cash conversion cycle (CCC), respectively. We use from multivariate regression model with panel data for test of research hypotheses. The Results of this study show that, firm size affects the Relation between CCC (as a measure of working capital management) and ROA (as a measure of firm performance). However, debt ratio and Governmental ownership don’t any significant effect on the relationship between working capital management and financial performance of firms

منابع و مأخذ:

[1] Zaibi, W., Agha, A.N., Impact of working capital management on financial performance of the Firm, Journal of Economic Info, 2018, 5(4), P.1-6. Doi: http://doi.org/10.31580/jei.v5i4.91

[2] Raheman, A., Nasr, M., Working capital management and profitability – case of Pakistani firms, International Review of Business Research Papers, 2007, 3, P.279-300.

[3] Forughi, D., MatinNezhad.R., Effect of Characteristics of Firms on Calculated Expected Return of Composite Implied Cost of Capital (CICC), Journal of Accounting Advances, 2014, 6(1), P.63-90. Doi: 10.22099/jaa. 2014.2258

[4] Gitman, L.J., Estimating corporate liquidity requirements: a simplified approach, the financial reviews, 1974, 9(1), P.79-88. Doi: http://doi org/10.1111/j.1540-6288.1974.tb01453.x

[5] Palombini, N.V.N., Nakamura, W.T., Key factors in working capital management in the Brazilian market, Revista de Administração de Empresas, 2010, 52(1), P.55-69.Doi: http://doi.org/10.1590/S0034-759020120 00100005.

[6] Caballero, J., Teruel, G., Solano, P., Working capital management in SMEs. Accounting and Finance, 2009, 50(3), P.511-527. doi.org/10.1111/j.1467-629X.2009.00331

[7] Myers, S.C., Majluf, N. S., Corporate financing and investment decisions when firms have information that investors do not have, Journal of Financial Economics, 1984, 13(2), P.187-221. Doi:http://doi.org/10.3386/ w1396

[8] Schilling, G., Working Capital's Role in Maintaining Corporate Liquidity, TMA Journal, 1996, 16(5), P.1-4.

[9] Raei, R. Saeedi, A., Fundamentals of Financial Engineering and Risk Management, Samt Publication, Iran, 2004, (in Persian).

[10] Brealey, A., Myeres, S.C., Principles of Corporate Finance, United States, McGraw-Hill, 2003. Doi: http://doi.org/10.2307/2327568

[11] Jeng-Ren, C., Li, C., Han-Wen, W., The determinants of working capital management. Journal of American Academy of Business, 2006, 10(1), P.149-155. 

[12] Chiou, J.R., Cheng, L., The Determinants of Working Capital Management, The Journal of American Academy of Business, 2006, 10(1), P.149-­155.

[13] Ng, C. K., Smith, J. K., Smith. R. L., Evidence on the determinants of credit terms used in inter firm trade. The Journal of Finance, 1999, 54(3) P. 1109-1129. Doi: http://doi.org/10.1111/0022-1082.00138

[14] Deloof, M., Does working capital management affect profitability of Belgain firms? Journal of Business Finance and Accounting, 2003, 30, P. 573-588. Doi: http://doi.org/10.1111/1468-5957.00008

[15] Nilsson, H., The effect of company characteristics on working capital management, Umea School of Business. 2010. Doi: http://doi.org:umu-35674 

[16] Jensen, M. C., Meckling, W., Theory of the firm: Managerial behavior, agency costs, and ownership structure, Journal of Financial Economics, 1976, 3(4), P. 305–360. Doi: http://doi.org/10.2139/ssrn.94043

[17] Rahmani, A., Mashayekh, Sh., Purazam,M., effects of ownership structure on firm performance, The Financial Accounting and Auditing Researches, 2010, 3(9), P.1-22 (in Persian).

[18] Gillan, S, L., Recent Development in Corporate Governance: An Overview, Journal of corporate finance, 2006, 12, P.381- 402. Doi: http://doi.org/10.1016/j.jcorpfin.2005.11.002

[19] Sulong, Z., Mat, N.F., Corporate governance mechanisms and firm valuation in Malaysian listed, Journal of Modern Accounting and Auditing, 2010, 6(1), P. 1-19. Doi: http://doi:10.17265/1548-6583/2010.01.001

[20] Moss, J. D., Stine, B., Cash conversion cycle and firm size: a study of retail firms. Managerial Finance, 1993, 19(8), P.25-34. Doi: http://doi.org/10.1108/eb013739

[21] Earle, J. S., Telegdy, A., Privatization Methods and Productivity Effects in Romanian Industrial Enterprises, Journal of Comparative Economics, 2002, 30(4), P.657-682. Doi: http://doi.org/10.1006/jcec.2002.1798

[22] Xu, X., Wang, Y., Ownership Structure and Corporate Governance in Chinese Stock Companies, China Economic Review, 1999, 10, P.75-98. Doi: http://doi.org/10.1016/s1043-951x (99)00006-1  

[23] Akimova, I., Schwodianer G., Ownership Structure, Corporate Governance and Enterprise Performance: Empirical Result for Ukraine. International Advances in Economic, 2004, 10, P.28-42. Doi:http://doi.org/10.10 07/bf02295575

[24] Ahmed, E.,The Determinants of Working Capital Management in the Egyptian SMEs, Accounting and Finance Research, 2018, 7(2), P.155-165. Doi: http://doi.org/10.5430/afr.v7n2p155 

[25] Lazaridis, I., Tryfonidis, D., Relationship between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange. Journal of Financial Management & Analysis, 2006, 19(1), P.1-12.

[26] Abeyratna, G., Hess,K., Hu, A., The Influence of the Degree of State Ownership and the Ownership Concentration on the Performance of Listed Chinese Companies, Research in International Business and Finance, 2007, 21, P.379-395. Doi: http://doi.org/10.1016/j.ribaf.2007.02.002

[27] Uyar, A., The relationship of Cash Conversion Cycle with Firm Size and Profitability, International Research Journal of Finance and Economics, 2009, 24, P.186-192.

[28] Niaz, A. B., Ghulam, A., Mujeeb, R., Syed Mir. M. S.,Relationship of Cash Conversion Cycle with Firm Size, Working Capital Approaches and Firm’s Profitability: A Case of Pakistani Industries, Pakistan Journal of Engineering, Technology & Science, 2015, 1(2), P.45-64. Doi: http://doi.org/10.22555/pjets.v1i2.148

[29] Ogundipe, S.E., Idowu, A., Ogundipe,L. O., Working Capital Management, Firm’s Performance and Market Valuation in Nigeria, International Journal of Social and Human Sciences, 2012, 6, P.143-147. 

[30] Mun, S.G., Jan, S., Working capital, cash holding, and profitability of restaurant firms, International Journal of Hospitality Management, 2015, 48(14), P.1-11.

[31] Shariatpanahi,M., effects of ownership Type on Managers performance in the firms listed  in Tehran Stock Exchange, Ph.D. Thesis, Allameh University, Tehran, Iran, 2001,(in Persian).

[32] Beatriz, M., Ignacio, R., Does the Type of Family Control Affect the Relationship Between Ownership Structure and Firm Value? International Review of Finance, 2017, 17(1), P.135-.146. Doi: http://doi.org/10. 1111/irfi.12093

[33] Setayesh, M. H., Kazemnejad, M., Zolfaghari. M., The effects of working capital management on the profitability of the firms listed in Tehran Stock Exchange, Empirical Studies in Financial Accounting, 2008, 6(23), P.43-66. (in Persian).

[34] Rejaul, K., Abdullah, A., M., Tota, M., Relationship Between Working Capital Management Efficiency and Profitability: A Comparative Study on Square Pharmaceuticals Limited and Beximco Pharmaceuticals Limited, in Bangladesh, International Journal of Economics, Finance and Management Sciences, 2017, 5(2), P.121-128. Doi: http://doi.org/10.11648/j.ijefm.20170502.16

[35] Mohamadi, M., The effect of Working Capital Management on the Profitability in the firms listed in Tehran Stock Exchange, Journal of Industrial Strategic Management, 2009, 6(14), P. 80-91(in Persian). 

[36] Rasaeian, A., Salavati,S.h., Balanced Score and value-based sustainable management, Peyke Nour, 2008, 7(14), P.104-116(in Persian).

[37] Hormozi, H., Aliahmadi, S., The Investigate Relationship between Working Capital with Corporate Governance and Pecking Order Theory in listed company in Tehran stock exchange (TSE),Management Accountiong, 2012, 5(15), P. 31-39 (in Persian).

[38] Baharmoghadam, M., Mohamadrezakhani, W., Hushmand Zaferanieh, R., Investigation of the Impact of Company Characteristics on Working Capital Management, Journal of Financial Accounting Knowledge, 2012, 2(6) P.71-89(in Persian).

[39] Dastgir, M., Honarmand,M., Examining the Effect of Corporate Governance Mechanisms on Efficient working Capital Management, Management Accounting, 2014, 7(22), P. 69-88(in Persian).

[40] Abuzayed, B., Working capital management and firms’ performance in emerging markets: the case of Jordan", International Journal of Managerial Finance, 2012, 8(2), P.155-179. Doi:http://doi.org/10.1108/17 439131 211216620

[41] Mashayekh, Sh., Noruzi,S., Ghashghaei, F., The impact  of  firm's cash holding level on the relationship between working capital and profitability, The Iranian Accounting and Auditing Review, 2016, 23(1), P.39-54, (in Persian). Doi: http://doi.org/10.22059/acctgrev.2016.57019

[42] Tangen, S., An overview of frequently used performance measures, International Journal of Productivity and Performance Management, 2003, 52(7), P.347-354.

[43] Padachi, K., Trends in Working Capital Management and its Impact on Firms’ Performance: An Analysis of Mauritian Small Manufacturing Firms, International Review of Business Research Papers, 2006, 2(2), P. 45-58.

[43] Balouei,E., Anvary Rostamy, A.R., Sadeghi Sharifc,J., Saeedid,A., The Impacts of Financial Structure on Financial Performance of Banks listed in Tehran Stock Exchange: An Empirical Application, Advances in mathematical finance & applications, 2018, 3(3), P.11-26, (in Persian).Doi: http://doi.org/10.22034/amfa.2018. 544946

[45] Yazdi, H., Mohammadian, M., Effect of Profitability Indices on the Capital Structure of Listed Companies in Tehran Stock Exchange, Advances in mathematical finance & applications, 2017, 2(3), P.1-11, (in Persian). Doi: http://doi.org/10.22034/amfa.2017.533085