Investigating the Factors Affecting Working Capital of Companies Using the Generalized Method of Moments

Abstract

This paper attempted to examine the determinants of investment level in working capital of companies listed on the Tehran Stock Exchange (TSE). For this purpose, data from 143 companies listed in the TSE were employed for 2004-2014. The generalized method of moments (GMM) was used to test the hypotheses. The findings suggested that in periods with lower GDP or lower corporate profitability, lower leverage, pre-period working capital and greater information asymmetry tended to make higher investment in working capital compared to other companies. In addition, there was no significant relationship between firm size, firm age and non-executives with corporate working capital.

Determinants and effects of trade credit financing: Evidence from the maritime shipping industry

“…Regarding the determinants of trade credit and trade debit, our study indicates that profitability, measured as net income over revenue, is negatively related to trade credit and positively related to trade debit for both shipping and nonshipping companies. These findings dissent from some prior studies proposing that high profitable companies keep low levels of net working capital, because they have better access to trade credit financing from their suppliers and they can maintain lower levels of inventories (see Azami & Tabar, 2016;Baños-Caballero et al, 2010Haron & Nomran, 2016;Zariyawati et al, 2016). Nevertheless, our findings concur with several studies on working capital management.…”

“…To begin with, literature reports both a positive relationship between firm performance and working capital (e.g., Abbadi & Abbadi, 2013; Gill et al, 2010; Mansoori & Muhammad, 2012; Moussa, 2019; Nyeadi et al, 2018; Rehman et al, 2017; Saarani & Shahadan, 2012) and a negative relationship between working capital and profitability (e.g., Azami & Tabar, 2016; Baños‐Caballero et al, 2010, 2013; Cao et al, 2022; Haron & Nomran, 2016; Zariyawati et al, 2016).…”

The Effect of Environmental Management Accounting (EMA) on Financial Performance and Working Capital Management (WCM) as Mediating Variables

“…Businesses that have good environmental performance will provide complete environmental accounting reporting information so that companies that have good environmental performance have a linear correlation with their financial performance. There are several factors that determine working capital which can come from within or outside the company, as research conducted by Gill (2011), Mansoori and Muhammad (2012), Taleb, et.al (2010), Naseer, Nuseibeh and Hadeya (2013), Hill, Kelly and Highfield (2010), Bei and Wijewardana (2012), Nazir and Afza (2009), Nakamura and Nakamura (2011) and Azami and Tabar (2016). Determinants that come from the company's internal include company size, company growth, operating cash flow, ROA and leverage.…”