The Effect of Working Capital Management on Reducing the Stock Price Crash Risk(Case Study: Companies Listed in Tehran Stock Exchange)
Journal Title: International Research Journal of Applied and Basic Sciences - Year 2013, Vol 6, Issue 9
Abstract
Present study examines the effect of working capital management on reducing the risk of decrease in stock prices. Decrease in stock prices can be due to weak and inefficient strategies taken by managers. One of the most important strategies taken by management is working capital management. Working capital management deals with managing the current assets and current liabilities. In case of inadequate policies to manage the company's working capital, finance manager could decrease current assets and increase current liabilities. Adopting this approach can lead the company to insolvency and bankruptcy due to poor liquidity position. Delay in payment of company’s debts can affect the credit rating of company and diversely affect company’s reputation and consequently weaken competitive advantage which can finally lead to decrease in stock prices. Considering the importance of working capital management in performance of firms, this research aims to answer the question whether working capital management can affect the stock prices or not. To measure the working capital we made use of Gitman’s cash conversion cycle (1974) and Chen’s negative factor stock return skewness model (2001) to measure the stock prices falls in 59 listed companies in Tehran stock exchange between 1998 and 2011. This study provides strong evidence that working capital management is likely to significantly reduce the risk of falling stock prices.
Authors and Affiliations
MajidAmeri| Faculty of Management and Accounting,university of Shahroud, Iran, Mohsen Lotfi| University of Economic Sciences, Tehran, Iran
Keywords
Related Articles
- EP ID EP6245
- DOI -
- Views 319
- Downloads 10
Effect of exogenous treatment of GA3 on germination of wheat seeds under salinity stress
In this study effect of different concentration of gibberlic acid (GA3) (H0: control, H1:GA3 (100mg/litr)H2:GA3 (150mg/litr) H3:GA3 (200mg/litr)) under four levels of salinity stress (S1:3.78, S2: 5.95, S3: 10.25 and...
An Investigation on the Relationship between social and environmental Information disclosure leveland firms Performance in Iran
This research aims to investigate the relationship between level of Corporate Social and Environmental Disclosure(CSED) and profitability. The profitability variables chosen are earnings before interest, tax, depreciatio...
Limitations of Performance Auditing Reports Insertion In Iran’s Budget Liquidation Report
The aim of this study is to identify the major constraints of inserting performance auditing reports in Iran’s budget liquidation report. To achieve this goal the scholar has designed a questionnaire based on five-point...
The Study and Analysis of Geo-tourism of sea side areas of Oman Sea Case study: chabahar-Gouater
The tourism basis of each area is its nature and geo-tourism is one of the most important parts of the tourism industry that is rapid growth in present decade in the world. There is much attention to this part for area d...
On the Almost Surely Convergence of the Specific Sequence
In this paper, we generalize some results of random variables with real value, to random variables with fuzzy value. In fact, we proved that under assumption ? ( ? ) , the sequence ( ? ? ) is convergent almost sure to ze...