Liquidity-Profitability Tradeoff Existence in Turkey: An Empirical Investigation Under Structural Equation Modeling

Baser, Furkan; Gökten, Soner; Küçükkocaoğlu, Güray; Türe, Hasan

doi:10.12775/cjfa.2016.013

Cited by 5 publications

(3 citation statements)

References 40 publications

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“…Although most previous literature has found a trade-off between liquidity and performance in financial management decisions, we find a statistically significant positive relationship between cash holdings and profitability for our sample of Spanish FFs, which means that a high level of cash holding not only benefits family objectives but also increases a firm's financial objectives through adequate management of liquid assets. This result can be seen as an important contribution to the knowledge on FFs and it is in line with a trend of literature supporting that the traditional liquidity-profitability trade-off may not be valid in some markets and for some particular types of businesses (Afza & Nazir, 2007;Baser et al, 2017;Terreno et al, 2020;Vazquez Carranza et al, 2017). In this vein, optimal liquidity management has the ability to involve all the operational components so that under some particular circumstances, the evolution of the liquidity and performance of a firm may come close.…”

Section: Are Cash Holdings Associated With Improved Family Firm Perfo...supporting

confidence: 88%

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

Parrado‐Martínez,

Comino‐Jurado,

Sánchez‐Andújar

2024

Manage Decis Econ

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Cash holding decision‐making is one of the main corporate challenges for family firms (FFs), with significant consequences for their growth and survival. It is closely connected to key financial decisions such as financing, investments, and dividends. The motivations behind adjusting cash holdings vary, encompassing precautionary, risk avoidance, opportunity cost considerations, and the spending hypothesis. In our study, we aim to integrate specific motivations for cash holding decisions that stem from the influence of family dynamics within these businesses since FFs have unique characteristics, which affect their financial choices. Therefore, we analyze the impact of family involvement in management and the generational stage of FFs on their level of cash holdings. The results of the partial least squares–structural equation modeling, which was estimated on a sample of 7269 unlisted Spanish FFs, show that the higher the level of family involvement in management, as well as the higher the generational stage, the higher the level of cash holdings, with this having a positive effect on the firm's performance. In addition, we find that the positive relationship between family involvement in management and the level of cash holdings is strengthened by family ownership and weakened by family governance. These findings are relevant for a better understanding of the complexity of cash holding decision‐making in FFs and have practical implications not only for the FFs themselves but also for the entities related to them due to the important links between a firm's liquidity and its risk of default and performance.

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Section: Are Cash Holdings Associated With Improved Family Firm Perfo...supporting

confidence: 88%

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

Parrado‐Martínez,

Comino‐Jurado,

Sánchez‐Andújar

2024

Manage Decis Econ

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“…Moreover debt ratio shows a significant negative relationship with logarithm of sales and current ratio with their coefficient -0.648 and -0.582. This means large firm maintains lower debt than small firms and low leveraged firms maintain high liquidity compare to high leveraged firms and these relationships also same as the study of Usman, Shaikh, and Khan, (2017); Baser et al (2016) and Vintila and Nenu (2016).…”

Section: Correlation Analysissupporting

confidence: 53%

Impact of Working Capital Management on Corporate Profitability- Empirical Evidence from Pharmaceutical Industry of Bangladesh

Islam¹,

Hossain²,

Hoq³

et al. 2018

IJEF

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Working capital management plays centric role in enhancing operational efficiency and their ultimate profitability. Globally financial managers have been searching the proper way on how to utilize working capital components which prolong profitability. The purpose of this study is to assess the impact of working capital components on profitability indicators of selected pharmaceutical firms in Bangladesh. The paper used financial data of 9 pharmaceutical firms listed in Dhaka stock exchange (DSE) covered 2011-2015. Two methods were used in this study for analysis data set. Firstly, to measure the relationship between selected variables Pearson Correlation matrix was used. Secondly, multiple regression analysis was used to investigate the impact working capital components on profitability of selected pharmaceutical firms. The study also conducted Durbin Watson test to assess autocorrelation of selected variables. In this study the correlation matrix identified a negative correlation between working capital components and profitability, whereas regression analysis found number of days account receivable (AR) had significant positive and current ratio (CR) and debt ratio (DR) had appeared a significant negative impact on profitability.

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“…The most frequently diagnosed dependence is the negative dependence. This has been confirmed, for example, by Baser (2016), Nishanthini and Meerajancy (2015). Although it appears less frequently, positive dependence has been confirmed empirically (see Table 5).…”

Section: Institutional and Macroeconomic Moderators Of The Relationship Between Profitability And Liquiditymentioning

confidence: 59%

Meta-study on the relationship between profitability and liquidity of enterprises in macroeconomic and institutional environment

Jaworski

Czerwonka

2021

Decision

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The main aim of the paper is to determine the relationship between profitability and financial liquidity of a company using meta-analysis. This method is based on a synthesis of many previous studies with the application of econometric tools. The results of the study show that, taking into account 16 economies, it is not possible to identify a common effect describing the relationship between the profitability of enterprises and their financial liquidity measured by the current liquidity ratio. The results of individual empirical studies that underlie the meta-analysis are diverse. This means that there are moderators of the strength and direction of this dependence associated with macroeconomic and institutional conditions. We attempted to separate them by means of meta-regression. This method involves the use of a regression model, where data are derived from both meta-analysis and external sources. We diagnosed two statistically significant moderators of the strength and direction of the relationship between profitability and liquidity. These are two factors: (i) private sector crediting and (ii) capital market development. Our paper contributes to the development of the existing knowledge by summarizing and binding previous individual empirical studies on the relationship between profitability and liquidity of enterprises and identifying factors affecting this relationship. This knowledge can assist financial managers in making more efficient decisions related to liquidity and working capital management.

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Liquidity-Profitability Tradeoff Existence in Turkey: An Empirical Investigation Under Structural Equation Modeling

Cited by 5 publications

References 40 publications

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

Impact of Working Capital Management on Corporate Profitability- Empirical Evidence from Pharmaceutical Industry of Bangladesh

Meta-study on the relationship between profitability and liquidity of enterprises in macroeconomic and institutional environment

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