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 259
- Downloads 10
The study and rating of influencing factors on Competitive Advantages of car companies - case study: saipa company
The purpose of this study was to identify the relationship between the enjoyment of technical resources and advanced hardware Saipa Company with a competitive advantage. In this study, the factors affecting the competiti...
Marginalization And Its Role In Social Pathos ( Case study Ardebil city)
Rapid growth, increasing urbanization and rural-urban migration, informal habitant has brought the issue of marginalization and proportionate to spread disorder in urban areas. Therefore, the role of social marginalizati...
Combined current sensing in power electronic applications for increasing SNR ratio
One of the most common current sensing methods is to insert a sensing resistor in the path of an unknown current. This method incurs significant power loss in a sense resistor at high output currents. In most methods, me...
Evaluation of E-commerce (Fiqh and law approach in Iran)
World Wide Web created very Opportunities and threats for human. One of these opportunities is E-commerce. It created several legal problems. This study attempts to survey the Ecommerce in Law and Fiqh of Iran. It used d...
The Hazrate David's authority in Ibne Arabi's acts
We attempt to this inquiry to show the venue of Prophet David on Ibne Arabi works and ideas, by emphasizing on Ibne Arabi' interpretation of Quran.In this study it is tried to discover philosophical and Erfanian concepts...