Capital Structure
Hassan Zalaghi; Maryam Zalaghi
Abstract
Working capital management increases performance and reduces risk, thereby lowering the cost of capital. Many studies have been conducted in the field of working capital, including the adjustment of working capital toward targets and the effects of various variables on it. However, the influence of the ...
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Working capital management increases performance and reduces risk, thereby lowering the cost of capital. Many studies have been conducted in the field of working capital, including the adjustment of working capital toward targets and the effects of various variables on it. However, the influence of the prevailing economic environment, including booms and recessions, on the speed of adjustment has received less attention. The purpose of this research is to investigate the effect of economic booms and recessions on the speed of working capital adjustment in firms listed on the Tehran Stock Exchange. For this purpose, data from 153 firms listed on the Tehran Stock Exchange during the period of 2011 to 2022 were used. This research is practical in terms of purpose. The research method is based on the use of panel data and is quantitative and correlational. To analyze the data and test the research hypotheses, the dynamic panel method with the System Generalized Method of Moments (GMM) was used. The research results showed that managers adjust the firm's working capital ratio toward the target working capital. Other findings indicated that the rate of working capital adjustments during economic booms is greater than during recessions in both the financial and real sectors of the economy. IntroductionPeriods of prosperity increase a company's sales and growth, leading to more financing through internal financial resources and working capital. On the other hand, maintaining a larger amount of current assets may negatively affect the company's liquidity management and profitability, potentially reducing the return on assets. Additionaly, during economic recessions, financing through internal financial sources becomes limited, and financing through other sources increases the cost of capital. Accordingly, investing more or less than the optimal amount in working capital may negatively impact the company's performance. Therefore, based on the balance theory, firms may have a target working capital level that balances its benefits and risks (Ahangar, 2020). Nevertheless, firms adjust their working capital levels only when the benefits of the adjustment outweigh its costs (Ahangar, 2020).Greater attention to working capital management is valuable for firms, as it increases performance and reduces risk, which in turn will reduce the cost of capital (Aktas et al., 2015). Business units may deviate from the optimal level of capital turnover due to advances in technology, changes in production costs, or random shocks. However, because optimal working capital offers advantages for business units, they continually strive to bring the actual level of working capital closer to the optimal level. The speed at which firms correct the deviation between the actual level and the optimal level of working capital is called the speed of working capital adjustment (Ahangar, 2020).In domestic research, working capital has not been adequately explored as a dynamic concept, and many questions in this area remain unanswered for Iranian firms. For this reason, this research intends to investigate the existence of optimal working capital in Iranian firms using dynamic models and to measure their speed in achieving optimal working capital. Additionally, given the impact of economic booms and recessions on the provision of financial resources, especially working capital, and the need to adjust working capital toward optimal levels to increase firm value, this research examines the effect of economic booms and recessions on the speed of working capital adjustment in Iranian firms. Literature ReviewFirms that do not face restrictions on financing through external financial sources can more easily change the cash conversion cycle and, in fact, their working capital ratio. They can adjust working capital more quickly and reach the target working capital ratio faster. This means that during periods of economic prosperity, financing company expenses becomes easier, reducing adjustment costs such as financing costs. According to the balance theory, the speed of working capital adjustment increases or decreases depending on these factors (Ahangar, 2020).In the literature related to capital turnover, several theories of capital structure, including balance theory (Miller, 1977) and hierarchical theory (Myers, 1984; Myers & Majluf, 1984) have been used to study the behavior of capital turnover. The equilibrium theory states that there is a balance point between the benefits and risks of investment, at which maximum value is obtained for firms. According to this theory, any deviation from the target turnover level is quickly adjusted (Ahangar, 2020). In the static balance theory, movement toward the target ratio is assumed to be instantaneous, while in dynamic balance theory, the path to the target ratio is a gradual process (Orlova & Rao, 2018). According to the hierarchical theory, firms, regardless of their target working capital, provide financial support according to a predetermined hierarchy. This financing can come from internal or external funds. Furthermore, in this theory, firms prefer internal funds to external financial sources to reduce the costs associated with information asymmetry when financing investment projects (Myers, 1984). In research related to working capital, the balance theory has attracted more attention (Aflatooni et al., 1401). The research hypotheses are presented as follows:H1: Managers adjust the company's turnover ratio toward the target turnover.H 2: During periods of prosperity, the speed of working capital adjustment in firms is higher than during recessions in the financial sector of the economy.H 3: During periods of prosperity, the speed of working capital adjustment in firms is higher than during recessions in the real sector of the economy. MethodologyThis research is practical, analytical, quasi-experimental, correlational in terms of research purpose, and retrospective and post-event in terms of the time dimension of the data. To collect financial and accounting data, the Rahvard Novin database and reports published on the Codal website were used, and Eviews software was employed to analyze the data. To estimate the research models, the Blundell & Bond (1998) system generalized method of moments estimator was used. The statistical population of this research consists of firms listed on the Tehran Stock Exchange. ResultsThe results of the research show that managers adjust the company's working capital ratio to align with the target working capital. Additionally, the research findings indicate that the speed of working capital adjustment during periods of prosperity is higher than during periods of recession in both the financial sector and the real sector of the economy. DiscussionThe results of the first hypothesis test showed that company managers tend to adjust the company's capital turnover according to their goals, whether they are in a period of prosperity or recession. This finding is consistent with the results of Banos et al. (2020), Ahangar (2020), and Aflatooni et al. (1400). This suggests that Iranian firms, by moving toward the goal of capital turnover, attempt to manage the impact of prevailing economic conditions to avoid the risk of bankruptcy during recessions and the decrease in profitability caused by the uncontrolled and unmanaged increase in current assets during boom periods. The results of the second and third hypothesis tests indicate that the speed of capital turnover adjustment during economic prosperity is higher than during economic recession in both the financial sector and the real sector of the economy. These findings are consistent with the results of Helfin et al. (2018) and Aflatooni et al. (1401). According to the results of this research, it can be concluded that firms have a greater ability to adjust their working capital during economic booms in both the financial and the real sectors. This plays an important role in the financial management of firms under different economic conditions. These results can assist financial managers in determining appropriate strategies for managing capital turnover in any economic period. Additionally, these findings can help financial and economic researchers gain a better understanding of how different economic conditions affect the financial behavior of firms. ConclusionThese results can help financial managers determine appropriate strategies for managing capital turnover in any economic period. Additionally, these findings can help financial and economic researchers gain a better understanding of how different economic conditions affect the financial behavior of firms. Based on the findings of this research, the following practical suggestions are provided: Investors and company managers should always keep in mind that economic prosperity cannot be sustained without optimal capital management. It is merely a factor that increases the value of firms, or, in the case of economic recession, it may lead firms toward bankruptcy. Therefore, they should consider the effects of deviations in working capital when making decisions. Investors and managers should pay particular attention to the speed of working capital adjustment during economic booms (both in the financial and real sectors) due to the growth in the company and the simultaneous increase in current assets. The necessity of optimal liquidity and working capital management is crucial, as creating a balance in these areas will lead to improved performance and increased value for firms.
Capital Structure
Seyed Alireza Hossieni,; Hasan Valiyan; Mohammadreza Abdoli; Maryam Shahri
Abstract
The purpose of this research is the startup accounting development field’s framework and appraisal in the context of capital market companies. This study is exploratory in terms of the type of objective, and it is considered mixed in terms of the type of data collection. In order to measure the ...
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The purpose of this research is the startup accounting development field’s framework and appraisal in the context of capital market companies. This study is exploratory in terms of the type of objective, and it is considered mixed in terms of the type of data collection. In order to measure the reliability of the identified dimensions, the fuzzy Delphi process was used to examine the confirmed axes from the phase of the fuzzy Delphi analysis, based on pairwise comparison in the quantitative section through the Micmac matrix. The results of this study in the qualitative part, during 13 interviews, identified four categories, 8 components, and 41 themes of the concept and developed them in the form of a multidimensional theoretical framework. In the quantitative section, it was also determined that the effectiveness of the "G_1" educational field strengthening dimension is higher than the other examined dimensions, and this dimension was selected as the most central factor in the development of startup accounting in the context of capital market companies. IntroductionFinancial startups are considered one of the most emerging ways of managing financial resources and accounting of the third generation. While accelerating the liquidity circulation cycle in industries, they also possess higher competitive capacities to leverage the advantages of financial markets. However, the importance of the development of startups is not necessarily tied to their novelty or uniqueness in driving competitive business dynamics, but rather to their ability to provide financial services at lower costs, with greater speed and universality at the financial market level, meeting the needs of beneficiaries. This can gain legitimacy for companies through their financial and accounting functions. Literature ReviewOne of the most exemplary business models is startups, which are often created as small and flexible units within organizational structures, or as start-up businesses in the form of small and medium-sized companies through innovative plans, they consistently aim to provide goods and new services that are competitive in the market. Therefore, startups can be defined in two ways. On the one hand, startups can be described as companies with the goal of achieving rapid growth in a specific market or situation. On the other hand, startups can be considered human institutions designed to create new products or services under uncertain conditions. Accordingly, startups should be considered a valuable resource for generating new knowledge, which has gradually transformed into innovation with the development of entrepreneurial infrastructure, as they leverage emerging technologies to invent new products and business models. MethodologyThis study is considered exploratory in terms of its goal within the methodology because it uses the analysis of foundational data theory based on Glazer's approach to identify the background procedures of accounting development for the implementation of financial startups in the context of capital market companies. In terms of the study’s results, it is developmental because the phenomena investigated lack theoretical coherence and an integrated content framework in the study’s context. Regarding the type of data, this study should be considered mixed. In the qualitative part, using foundational data theory and conducting interviews, the effective background procedures for the development of accounting for the implementation of financial startups are identified in the form of a theoretical framework, ensuring the reliability of the identified dimensions through Delphi analysis. In the quantitative part of this study, using the MicMak matrix, an attempt is made to identify the most central area of startup accounting development in the context of capital market companies by comparing the criteria in the row " " and the column " ". ResultIn the qualitative part, through the approach of analyzing foundational data theory and conducting interviews with experts, a total of 41 conceptual themes; 8 components, and 4 categories were identified during the three stages of open, central, and selective coding. Based on this, a theoretical, multidimensional framework was developed, focusing on key axes effective in the development of startup accounting. Subsequently, the reliability of the axes identified through the foundational data theory was measured by performing a fuzzy Delphi analysis. The results indicate the confirmation of all dimensions within the analysis threshold of 0.7. DiscussionIn the following, the axes identified through the Micmac matrix were compared in pairs between the positive pole "+ve" and the negative pole "-ve" to determine the level of influence of row "i" on column "i" or vice versa. The results of the placement of the 8 confirmed axes in the 4 quadrants of the Micmac matrix are significant. Based on this analysis, it was determined that the two dimensions of strengthening the ecosystem fields "G5" and strengthening the educational fields "G1" respectively have a higher level of influence and effectiveness than the other dimensions.The results indicate that capital market companies, to advance their goals of implementing start-up accounting procedures, should focus on strengthening the skill capacities of accountants to effectively use these types of software platforms, based on structural needs assessments.
Capital Structure
Mahmood Madhoosh; Mehdi Safari gerayli; Javad Ramezani; Javad Babaee Khalili; Mehdi Khalilpour
Abstract
This study, while identifying the emerging fields of human rights accounting development in Iran's capital market, seeks to evaluate them within the context of the research. Using interviews and the grounded theory process, through three stages of open, central, and selective coding, an attempt was made ...
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This study, while identifying the emerging fields of human rights accounting development in Iran's capital market, seeks to evaluate them within the context of the research. Using interviews and the grounded theory process, through three stages of open, central, and selective coding, an attempt was made to develop the theoretical framework of the phenomenon. Finally, through the matrix processes, the most effective field of human rights accounting development was determined in the context of the study. The results of the qualitative part of this study, from a total of 321 open codes, indicate the identification of 32 themes, 6 components, and 3 main categories. IntroductionHuman rights are considered one of the key objectives of international institutes and organizations today, influencing various aspects of social functions. In addition to identifying the emerging contexts of human rights development in Iran’s capital market, this study seeks to evaluate these contexts within the research framework. Conducting such a study can serve as a basis for research innovation from a methodological perspective, while also contributing to the theoretical literature on human rights accounting and increasing the level of theoretical knowledge on the subject. This is particularly relevant given the structural features of companies in different societies and capital markets.Theoretical frameworkHuman rights represent a level of adjudication that every human, by nature, should enjoy. The dimensions of human rights include inherent rights, equal rights, inalienable rights, and universal rights. Human rights are a set of rights that arise from human nature, and every person in society should enjoy them without exception. Two narrow and wide approaches can be identified at the theoretical level. The wide approach is a process based on the limitless flow of data at the societal level, where information can be accessed, transferred, and publicized freely. In this way, freedom of information in human rights regulations refers to the people's right to access all types of information, including information in financial markets (McDonagh, 2020). The narrow approach, which emerged due to changes in the international community over time, narrows the range of information freedom and focuses exclusively on citizens' freedom to access information held by governmental institutions.MethodologyThe present study is developmental in terms of results, exploratory in terms of purpose, and combinatory in terms of data type. In the qualitative part, data were first collected through interviews using open, axial, and selective coding to identify the emerging contexts of human rights accounting in capital market companies. To confirm the reliability of the identified contextual axes, the Fuzzy Delphi analysis process was employed. Subsequently, in the quantitative part, the study seeks to prioritize the most effective axes using matrix analyses with row i and column j and MATLAB software. Given the nature of the study, which combines data collection processes in both qualitative and quantitative parts, the initial stages involved conducting interviews to gradually reach theoretical saturation by identifying the emerging contexts in human rights accounting through unstructured, in-depth interviews and designing open-ended questions. After developing the conceptual codes from the interviews, the process shifted to semi-structured and structured interviews to differentiate the components, creating general categories to facilitate theoretical saturation.Research findingsIn this section, the findings from the data-based theoretical analysis in the qualitative part are first presented to design a model, followed by matrix analysis to advance the objectives of the quantitative part. In the qualitative part, 14 accounting experts were interviewed using a three-stage coding process within the data-based theory to identify the emerging contexts of human rights development at the level of capital market companies, forming a theoretical framework. Based on the specification of coding processes according to Glasier's approach in data-based analysis, a theoretical framework related to emerging contexts in human rights accounting development can be proposed at the level of capital market companies.Next, Fuzzy Delphi analysis is employed to determine the experts' consensus regarding the appropriateness of the research components with the identified categories in the emerging contexts of human rights accounting development. Fuzzy Delphi analysis was used to assess the reliability and fit of the main components of the proposed model. All identified components were confirmed in the qualitative stage, and theoretical consensus was achieved. Therefore, this study shows that the most important context in the emerging development of human rights accounting in capital market companies is the development of effective governance functions aimed at motivating equal approaches among operational and financial units within the company and its stakeholders.Discussion and conclusionThe purpose of the present study is to evaluate the emerging contexts in human rights accounting development in Iran’s capital market. Grounded Theory was used to establish a theoretical framework for this phenomenon. A total of 321 open codes, 32 themes, 6 components, and 3 main categories were derived from 14 interviews, totaling approximately 830 minutes. Based on this analysis, a model related to the emerging contexts in human rights accounting development was proposed for Iran’s capital market.Matrix analysis revealed that the most important context in the emerging development of human rights accounting in capital market companies is the development of effective governance functions to promote equal approaches between the financial and operational units of the company and its stakeholders. The role of corporate governance as an influential factor in human rights accounting development includes fostering diversity in the selection of board members to represent various stockholder groups, considering factors such as religion, race, and gender. This diversity can enhance the effectiveness of supervision over managers and financial units.Implementing this approach can strengthen shareholders’ motivation to enter the capital market and invest in companies with a commitment to human rights. Developing accounting management information systems under governance supervision can facilitate the advancement of human rights accounting by enhancing the financial reporting language. Furthermore, these systems can significantly contribute to the creation of a data bank in companies, enabling them to report to human rights institutions. To keep their financial functions up-to-date with human rights compliance at the capital market level, it is crucial for companies to adhere to human rights management accounting information systems and invest in these areas to provide more robust information.Given the importance of corporate governance as an effective mechanism in shaping human rights accounting in capital market companies, it is recommended that boards of directors strengthen managerial oversight by focusing on the behavioral, ethical, and operational aspects of companies, ensuring the equal protection of citizens’ rights in accounting processes and procedures.
Capital Structure
Mehdi Dasti; Mohammad Firouzian Nezhad; Ali Mahmoodi
Abstract
The purpose of this study is evaluating the reduction of the government's financial burden through the typology of drivers affecting generational accounting in the capital market by action research. In terms of methodology, this study has used Colaizzi's model (1978) to implement action research steps. ...
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The purpose of this study is evaluating the reduction of the government's financial burden through the typology of drivers affecting generational accounting in the capital market by action research. In terms of methodology, this study has used Colaizzi's model (1978) to implement action research steps. Therefore, based on this model, first, through interviews with experts and open coding, an effort was made to identify n Effective drivers on the implementation of generational accounting in capital market companies. Then, in order to validate the propositions, a critical evaluation was done to compare the propositions with similar researches, so that the propositions can enter the stage of forming a focus group to discuss and exchange opinions for the cognitive separation of each proposition in the form of a category. The results showed that a total of 22 propositions were identified from a total of 12 interviews and 217 open codes created. On the other hand, it was determined in the quantitative section, 22 criteria identified in 4 categories were the creators of the generational accounting typology framework of capital market companies. IntroductionOne of the most emerging concepts in the field of accounting knowledge, which in recent years has become a factor connecting the public sector to achieve sustainable development in the private sector, is generational accounting. Created to measure the relative financial burden on future generations, generational accounting is considered one of the financial tools of governments, both in the public and private sectors, that can help balance the circulation of cash in social contexts. Since industries operating in the capital market seek to provide financial resources to advance their business goals and facilitate economic growth and development, attention to the processes of allocating financial resources through the type of government support governance can reduce the financial burden on future generations. The purpose of this study is to evaluate the reduction of the government's financial burden through the typology of drivers affecting generational accounting in the capital market using action research. MethodologyIn terms of methodology, this study has used Colaizzi's model (1978) to implement action research steps. Therefore, based on this model, first, through interviews with experts and open coding, an effort was made to identify effective drivers influencing the implementation of generational accounting in capital market companies. Then, in order to validate the propositions, a critical evaluation was conducted to compare the propositions with similar research, so that the propositions could enter the stage of forming a focus group to discuss and exchange opinions for the cognitive separation of each proposition into a category. Then, through a Q evaluation checklist, each statement was scored between +4 and -4, and finally, a 4-level matrix was created to establish a foundation of effective drivers in the implementation of generational accounting, to reduce the government's financial burden on future generations. ResultAs it was determined during the research process, first through interviews and open coding, generational accounting propositions were identified. Then, to achieve validity, a matching between similar researches was performed to provide the possibility of entering the statements identified in the Q analysis model for the cognitive classification of this phenomenon in the context of capital market companies. Subsequently, by forming a focus group to determine the cognitive categories of the examined concept, during four sessions and by creating a Q evaluation checklist from +4 to -4 in 22 slots according to the identified propositions, the necessary actions were taken, and participants were asked to place each proposition in one of the 22 slots of the Q evaluation checklist. Then, through the Wiremax matrix, cognitive classes were determined regarding the separation of drivers affecting the implementation of generational accounting, and the results indicated the existence of four cognitive classes, which can be effective in reducing the financial burden of governments on future generations. The results showed that a total of 22 propositions were identified from a total of 12 interviews and 217 open codes were created. On the other hand, it was determined in the quantitative section that 22 criteria identified in four categories formed the creators of the generational accounting typology framework of capital market companies. ConclusionThe results showed that focusing on net transfer payments in the embargoed conditions of the country's industries can be considered a form of contingency governance that aims to balance the financial flow in the country's economic system. It reduces the high dependence of industries on developed economies in terms of providing resources or technological knowledge and helps balance the financial burden of the government in saving resources. Because the inefficiency of the economic infrastructure of the capital market system does not allow for the optimal allocation of resources to industries, the government sees no other way to prevent negative economic growth and the influence of other macro-economic factors, such as inflation, other than the allocation of resources through transfer payments. Although it is possible to infer the consequence of economic stickiness due to political maneuvers in the shadow of transfer payments, industries have no choice but to accept the role of the government in receiving transfer resources due to the lack of commercial exchange and the use of strategies with similar foreign companies. It is also important to mention that the lack of similar research with the analytical nature of this study makes it impossible to compare the results with other research.
stock exchange
Behrooz Badpa; Sohrab Osta; Fatemeh Darvish-Hoseini
Abstract
Working capital management is crucial for business growth and survival as it maximizes enterprise value and shareholder wealth, thereby maintaining competitive conditions and optimal performance. This study identified and explained accounting variables determining operational efficiency (OE) of the companies ...
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Working capital management is crucial for business growth and survival as it maximizes enterprise value and shareholder wealth, thereby maintaining competitive conditions and optimal performance. This study identified and explained accounting variables determining operational efficiency (OE) of the companies listed on the Tehran Stock Exchange (TSE), Iran, in light of working capital items. The statistical population consisted of all companies, and the samples were 112 cases listed during 2016-2020. Utilizing an applied, descriptive-correlational research design, the relationship between the variables was then established. The dependent variable was OE, evaluated using data envelopment analysis (DEA); and the independent ones were working capital items and dividend growth rate. To investigate the effect of the independent variables on the dependent one, eight hypotheses were formulated, and multivariate linear regression with panel data in a fixed-effects model was implemented. Testing the hypotheses at a 95% confidence interval demonstrated that average period of collection of claims, average debt repayment period, dividend growth ratio, cash holding level, and liquidity ratio have a significant positive effect on OE. Nevertheless, the cash conversion cycle, and average inventory turnover period have negative impacts. Managers are thus suggested to identify working capital items and exploit them along with short/long-term goals in companies. This is practical in evaluating financial flexibility and solvency, facilitating optimal liquidity, and increasing business profitability and performance. Furthermore, learning about such items is helpful to investors, creditors, and analysts to make optimal decisions. IntroductionWorking capital management in companies plays a key role in their growth and survival. This business process also helps increase the value of such entities and maximize their shareholder wealth, thereby maintaining competitive conditions and optimal performance. Representing the management of current resources and expenses in a company, working capital management has two components, namely, the management of current assets and liabilities, whose balance is of utmost importance. Decisions made about each one can affect the other (Jahan Khani & Talebi, 1999). On the word of Nath et al. (2010), working capital items have a critical role in the operational efficiency (OE) of a company as well as its marketing capability. In this line, Fang et al. (2008) also believe that working capital items have high liquidity, and are directly associated with the operating results and efficiency of a company, so managing cash in the short term is especially relevant for competition in markets. Therefore, the main items in working capital can significantly shape the operating results in a company, including contribution margin, market share, and OE. Against this background, the present study is to identify and explain the accounting variables determining the OE of the companies listed on the Tehran Stock Exchange (TSE), Iran, in light of the working capital items.Materials & MethodsConsidering the type of supervision and the degree of control, this study is categorized as field research, because the variables were investigated in their natural state. With regard to the data collection method, this study is placed into documentary research. Utilizing an applied, descriptive research design, the relationship between the given variables was established via a correlational study. The statistical population comprised the companies listed on the TSE, Iran, and the study samples included 112 cases listed during 2016-2020. The dependent variable was OE, evaluated using data envelopment analysis (DEA), and the independent variables were working capital items and dividend growth rate. Profitability index, company size, financial leverage, and operating cash flow (OCF) were correspondingly deemed as the control variables in the research model. To shed light on the effect of the independent variables on the dependent one, eight hypotheses were initially formulated, and then multivariate linear regression using panel data in a fixed-effects model was implemented to test them. In order to analyze the data and interpret the results, descriptive and inferential statistics were ultimately utilized.FindingsUpon presenting the descriptive statistics and checking the assumptions of the regression as well as determining themost suitable research model, the linear regression equation was estimated using the fixed-effects model, as described in table 1Discussion & ConclusionAs confirmed by the study findings, working capital items can explain the OE of the companies listed on the TSE, Iran. In this respect, the results of testing the main research hypothesis are consistent with the reports by Sun et al. (2020) and Nath et al. (2010). The outcomes of testing the secondary hypotheses also reveal a significant positive relationship between the variables of average period of collection of claims, average debt repayment period, dividend growth ratio, cash holding level, and liquidity ratio and the variable of operational efficiency. Nevertheless, there is a significant negative relationship between the variables of cash conversion cycle and average inventory turnover period and operational efficiency.Considering these results, cash holding level and liquidity ratio have a positive effect on operational efficiency, which supports the findings in Nath et al. (2010). According to Nath et al. (2010), working capital items with high liquidity help improve the OE of a company, indicating its high capability to manage cash in the short term, as a requirement for its competitive presence in markets. The study results also agree with those concluded by Afrifa et al. (2022) that holding more cash facilitates working capital efficiency. Based on the study findings, average inventory turnover period has a negative effect on OE, in harmony with the results in Deloof (2003) that high inventory level declines the profitability and performance of a company. In his opinion, managers can increase the profitability and performance of businesses by reducing inventory levels. In view of the cash conversion cycle in the given companies during the study period here, the relationship between this variable and OE is negative, which is consistent with the results in Abdulla et al. (2017) that companies with higher cash conversion cycle are more efficient in managing their working capital as compared with other entities.From this perspective, managers are suggested to identify the role of working capital items and exploit them in line with the short/long-term goals in companies. This is practical in evaluating financial flexibility and solvency, and facilitates achieving optimal liquidity, and subsequently increasing business profitability and performance. Furthermore, learning about the role of working capital items is of assistance to investors, creditors, and analysts to make optimal decisions. Furthermore, it is possible to carry out the same study in the future with respect to the size and type of industry of the companies listed on the TSE, Iran, and complete a comparative study regarding the companies operating in each industry. Besides, it is recommended to analyze the effect of various working capital strategies on economic added value in a separate study. Investigating the effect of various strategies and components of working capital on stock price and its fluctuations should also be the subject of further research.
