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The influence of firms' capital expenditure on firms' working capital management

Author

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  • Mahdi Salehi
  • Reza Ghorbanzadeh

Abstract

Organisations are basically dealing with three kinds of financial decisions including capital structure decisions, capital budgeting decisions, and decisions regarding working capital management. Among all, working capital management is one of the important components of corporations, particularly when it participates in firm's profitability and liquidity. This study aims to investigate the influence of capital expenditure on working capital management of companies listed on the Tehran Stock Exchange. In order to assess working capital, this study uses net liquidity balance and working capital requirement. In this regard, a multiple regression model is developed for 155 companies during 2008-2013. The obtained results confirm the previous literature indicate that firm's operating cash flow have a significant correlation with working capital management. The obtain findings would develop the basis of working capital management knowledge, would help companies in effective working capital management, and would improve growth opportunities related to capital expenditure.

Suggested Citation

  • Mahdi Salehi & Reza Ghorbanzadeh, 2016. "The influence of firms' capital expenditure on firms' working capital management," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(3), pages 287-301.
    • Handle: RePEc:ids:ijecbr:v:11:y:2016:i:3:p:287-301
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    References listed on IDEAS

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    1. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
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    5. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    6. Bartov, Eli & Bodnar, Gordon M, 1994. "Firm Valuation, Earnings Expectations, and the Exchange-Rate Exposure Effect," Journal of Finance, American Finance Association, vol. 49(5), pages 1755-1785, December.
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