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Working capital management, firm performance and macroeconomic factors: Evidence from Iran

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  • Iman Soukhakian
  • Mehdi Khodakarami

Abstract

This paper investigates the impact of working capital management (WCM) on firm performance among listed Iranian manufacturing firms, focusing on the direct and moderating roles of inflation and GDP variables. This study uses the ordinary least squares with robust standard errors to analyze panel data covering the period 2010–2016. Two-stage least squares with robust standard errors is also used to control the endogeneity problem. The results show that the cash conversion cycle (CCC) is negatively related to return on assets and to refined economic value added (REVA). That is, the shorter time the span between an expenditure to purchase raw materials and the collection of the receivables for sold goods, the higher the performance. However, when endogeneity problem is controlled for, CCC loses its relationship to REVA. Macroeconomic variables are positively and significantly related to ROA, but only inflation is significantly related to REVA. Moreover, macroeconomic factors do not moderate the relationship between WCM and firm performance.

Suggested Citation

  • Iman Soukhakian & Mehdi Khodakarami, 2019. "Working capital management, firm performance and macroeconomic factors: Evidence from Iran," Cogent Business & Management, Taylor & Francis Journals, vol. 6(1), pages 1684227-168, January.
    • Handle: RePEc:taf:oabmxx:v:6:y:2019:i:1:p:1684227
    DOI: 10.1080/23311975.2019.1684227
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    Cited by:

    1. Stanić Milan & Cita Melita & Šulentić Marina Stanić, 2023. "The Influence of Working Capital Management on the Profitability of Manufacturing Enterprises - The Case of Croatia," South East European Journal of Economics and Business, Sciendo, vol. 18(2), pages 126-139, December.
    2. Orman Hamedi Ilkhechi & Saeid Anvar Khatibi, 2020. "The Impact of Earnings Persistence on the Operating Cash Flows with Emphasis on Financial Constraints," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 6(5), pages 265-274.
    3. Mutambara Tatenda Emmanuel & Nyatanga Phocenah & McCullough Kerry, 2023. "The Impact of Working Capital and Macroeconomic Variables on the Profitability of Listed Industrial Firms in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 13(5), pages 32-42, September.
    4. M N, Nikhil & S Shenoy, Sandeep & Chakraborty, Suman & B M, Lithin, 2023. "Is the Nexus Between Capital Structure and Firm Performance Asymmetric? An Emerging Market Perspective," MPRA Paper 119669, University Library of Munich, Germany, revised 17 Nov 2023.
    5. Ahsan Akbar & Minhas Akbar & Marina Nazir & Petra Poulova & Samrat Ray, 2021. "Does Working Capital Management Influence Operating and Market Risk of Firms?," Risks, MDPI, vol. 9(11), pages 1-20, November.
    6. Ahmed Mohamed Habib & Nahia Mourad, 2022. "Analyzing the Efficiency of Working Capital Management: a New Approach Based on DEA-Malmquist Technology," SN Operations Research Forum, Springer, vol. 3(3), pages 1-20, September.
    7. Ajeigbe Kola Benson & Habanabakize Thomas & Ganda Fortune, 2022. "The impact of the selected macroeconomic indicators’ volatility on the performance of South African JSE-listed companies: a pre-and post- Covid-19 study," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(4), pages 193-204, June.
    8. Faisal Mahmood & Zahoor Ahmed & Nazim Hussain & Younes Ben Zaied, 2024. "Macroeconomic factors and financing strategies in working capital: Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 35-57, January.

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