Investigating the impact of bold working capital management on the wealth of shareholders of companies listed on the Tehran Stock Exchange

Number of pages: 102 File Format: word File Code: 30805
Year: 2014 University Degree: Master's degree Category: Management
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  • Summary of Investigating the impact of bold working capital management on the wealth of shareholders of companies listed on the Tehran Stock Exchange

    Academic Thesis for M.A.

    Department: Financial Orientation Business Management

    Abstract:

    Working capital management plays an important role in the better performance of companies. Therefore, determining the appropriate policies in this direction can have a greater impact. Because as the performance of companies improves, their value also increases. Therefore, it can be said that the shareholders' wealth will also increase. The current research was conducted with the aim of investigating the effect of bold working capital management on the wealth of shareholders of companies listed on the Tehran Stock Exchange. Linear multivariate regression models have been used to test the relationship between research variables. Also, two hypotheses were developed for the research. The statistical sample of the research includes 137 companies during the years 1388 to 1392 (5-year period), the number of observations is 685 companies. The research findings indicate that bold investment policies have a positive effect on shareholders' wealth and affect 65% of its changes. About the second hypothesis, it can be said that bold financing policies have a negative effect on shareholders' wealth, and 63% of changes in shareholders' wealth occur through bold financing policies.

    Key words

    Bold working capital management, bold working capital management, bold investment management, bold financing management, wealthy shareholders

    Introduction

    more than It has been a hundred years that financial management as a scientific discipline has undergone major changes and every day it has expanded more and its various fields have become more specialized and continue to operate. In the last century, manufacturing-industrial companies have mass-produced large quantities of goods and made huge profits. This caused the issues of planning and control, especially in terms of liquidity, to be gradually taken into account in financial management, and working capital management became an important part of business unit management. Working capital is one of the items of the financial structure of any profit-making unit. Working capital management is the management of resources and expenses of funds, which has a significant impact on the continuity of activity and maximizing the wealth of shareholders. The policies and procedures that create the policy of financial managers are based on the assumption that the company has made some major decisions and implemented them (Madras and Abdullahzadeh, 2018). These decisions include the determination and selection of the type of goods and services that must be offered and the way of financing (for the provision of fixed assets) of the company. These decisions play a major and decisive role in the long-term profitability of the company; Therefore, the policies of working capital are not determined with the aim of increasing profit per share, but the managers seek to obtain favorable liquidity so that they can meet the profitable goals of the company in order to create wealth for the shareholders. Rapid technological changes along with increasing global competition make the responsibility of managers heavier in their activities. One of the activities of managers is decision making. The problem of decision-making can be seen in all fields of financial affairs, and this rule is not excluded from working capital management (Madras and Abdullahzadeh, 1388).

    In terms of time, assets and liabilities can be divided into short-term (current) and long-term (non-current) classes. As stated in financial management texts, current assets are called working capital and the difference between current assets and current liabilities is called net working capital. One of the basic issues of financial management is managing all types of current assets and liabilities. In theory, current assets usually have lower returns than fixed assets. Current debts are also less expensive compared to other types of financing methods. Therefore, the combination of current assets and liabilities is very important to each other and to the total assets because its inappropriateness will reduce the value of the company due to low returns or high costs. Therefore, financial managers must first create a suitable combination between current assets and total assets on the one hand and total liabilities and current liabilities and equity on the other hand, and secondly, make a decision regarding the constituent components of working capital and the amount of each in such a way as to ultimately realize the goal of maximizing the value of the company (Madras and Abdullahzadeh, 2018).Therefore, working capital management consists of managing various types of current assets and current liabilities and determining the optimal amount for each. Meanwhile, business unit managers in different conditions and situations take different actions and apply policies to manage working capital, which can be bold policies that result in more profit (obligation); Such as extending the period of debt collection for the purpose of increasing credit sales (Gil and Biger [1], 2013). Therefore, the market has reacted based on the expressed profit of the business unit, which has an effect on the stock price in the market, which will not result in an increase (or decrease) in wealth for the shareholders (Gol [2] et al., 2012). The importance of working capital comes from the fact that the levels of working capital have an effect on the profitability and the level of risk that the company can bear and will ultimately affect the value of the company. Recent liquidity crises highlight the importance of working capital management and control. To achieve optimal working capital, managers must control the trade-off between maximizing profitability and liquidity. An optimal working capital management is expected to create positive value for the firm. Empirical research showed that effective working capital management increases the market value of a company; Finally, it has a positive effect on shareholders' equity (Sandy[3] et al., 2012). Now, the question for investors is whether the bold policies of working capital management have an effect on their wealth. Therefore, the main problem of the current research is to investigate the effect of bold working capital management on shareholders' wealth in companies listed on the Tehran Stock Exchange. 1-3) Research objectives Working capital management is the optimal combination of working capital items, i.e. current assets and current liabilities. Managers of for-profit units in different situations, according to the internal and external factors of the for-profit unit and according to risk and return, should choose the appropriate strategy for current assets and current liabilities. Investigating, controlling and planning about working capital items in order to choose the best management strategy and determine the appropriate policies by business unit managers is necessary to increase the wealth of shareholders.

    Therefore, two objectives are proposed for the present research:

    Explaining the impact of bold investment policies on the shareholders.

    Explaining the impact of bold financing policies on the wealth of shareholders.

    Users and users of research can include capital market managers and policy makers, investors and financial analysts. Also, researchers and academics can also benefit from the results of this research in advancing their research goals.

    1-4) Importance of the research topic

    The role of Tehran Stock Exchange is important and important in the economy of every country. Investigating the financial performance and monitoring the financial situation of Tehran Stock Exchange is considered important for depositors, owners, potential investors, managers and of course market regulators. Today, any change in the stock exchange can greatly affect the commercial activities of the country. So that after the restart of the stock exchange, it has seen noticeable changes in the country's economy.

    Given that shareholders are looking for safe investment and management policies in working capital are effective on their interests (Gil and Biger, 2013). In this research, the effect of management policies on bold working capital is discussed with shareholders' wealth. 1-5) Research questions This research seeks to find an answer to the research question of determining the relationship between bold working capital management policies and shareholders' wealth. Based on this, the following questions are asked:

    Question 1: What is the effect of bold investment policies[4] (AIP) of working capital management on shareholders' wealth?

    Question 2: What is the effect of bold financing policies[5] (AFP) of working capital management on shareholders' wealth?

    1-6) Research hypotheses

    The hypotheses of this research are based on They were set as follows:

    The first hypothesis of the research: Bold investment policies have an effect on the wealth of shareholders.

    The second hypothesis of the research: Bold financing policies have an effect on the wealth of shareholders.

  • Contents & References of Investigating the impact of bold working capital management on the wealth of shareholders of companies listed on the Tehran Stock Exchange

    List:

     

    "Table of Contents"

     

     

    Abstract..

    Z

     

    Chapter One: General Research.

    1

    1-1) Introduction..

    2

    1-2) statement of the problem..

    2

    1-3) research objectives..

    4

     

    1-4) importance of the research topic.

    4

    1-5) research questions..

    4

    1-6) research hypotheses..

    5

    1-7) scope of research..

    5

     

    1-8) research method..

    5

    1-9) definition of words and terms.

    6

    1-10) research structure..

    7

    Chapter two: literature and research background.

    8

     

    2-1) introduction..

    9

    Part one: research literature.

    10

    2-2) Nature and importance of working capital.

    10

    2-3) Factors affecting working capital.

    11

     

    2-3-1) cash management.

    11

    2-3-2) ratio Debt.

    12

     

    2-3-3) Operating cash flow.

    12

    2-3-4) Risk control tools.

    12

     

    2-4) Different working capital and financing strategies.

    13

    2-4-1) Management of current assets.

    16

     

    2-4-1-1) Conservative management of current assets.

    16

     

    2-4-1-2) Bold management of current assets.

    16

    2-4-2) Management of current liabilities.

    17

     

    2-4-2-1) Conservative management of current liabilities.

    17

     

    2-4-2-2) Bold management of current liabilities.

    17

    2-5) Management of working capital, risk and return.

    18

    2-6) Characteristics of risk and return according to the management of current assets and current liabilities.

    19

     

    2-7) Financial ratios and management of working capital.

    20

    2-8) working capital components.

    22

    2-8-1) current assets.

    22

     

    2-8-1-1) cash.

    22

    2-8-1-2) short-term investment 24 2-8-1-3 Accounts receivable 25 2-8-1 4 Inventory

    2-8-2-1) accounts payable.

    25

    2-8-2-2) short-term loans.

    26

     

    2-8-3) cash conversion cycle.

    26

    2-9) Profit, wealth, value and return.

    28

    2-10) Theory of value..

    28

     

    2-10-1) Types of values.

    29

    2-10-2) Evaluation process.

    30

     

    2-10-3) principles of valuation theory.

    30

    2-10-4) valuation approaches.

    31

     

    2-11) determination of company value.

    33

    2-12) working capital and value.

    33

     

    Second part: research background.

    34

     

    2-13) internal research.

    34

     

    2-14) external research.

    36

     

    2-15) summary of the conducted research.

    39

     

    2-16) chapter summary ..

    41

     

    Chapter three: research methodology.

    42

     

    3-1) Introduction..

    43

     

    3-2) research method..

    43

     

    3-3) definition of statistical population and sample size.

    44

     

    3-4) data collection method and research tools.

    45

    3-5) Information analysis methods.

    45

    3-5-1) Statistical methods.

    45

              3-5-1-1) Statistics

    45

     

              3-5-1-2) inferential statistics.

    45

     

         3-5-2) default test of using the regression model.

    45

     

             3-5-2-1) test The normality of the dependent variable and the error term. 46 3-5-2-2) test of the suitability of the linear model and the absence of irrelevant points. 46 3-5-2-3 test of the absence of autocorrelation of errors.

              3-5-2-4) Homogeneity of errors test.

    46

     

              5-3-5) Colinearity test of variables.

    47

     

    3-6) Research models.

    47

    3-7) Chapter Summary.

    48

    Chapter Four: Data Analysis.

    49

    4-1) Introduction.

    50

    4-2) Statistical tests necessary for multivariate regression analysis.

    50

     

    4-3) Regression model default test.

    51

       4-3-1) Descriptive statistics of final models.

    51

        4-3-2) Test of normality of dependent variables.

    52

    4-3-3) Manai test of model variables.

    53

    4-3-4) Collinearity test.

    54

    5-4-3) Model estimation and research hypothesis test analysis.

    55

              4-3-5-1) Limer's F test.

    56

     

             4-3-5-2) ) Hausmann test.

    56

     

              4-3-5-3) The results of the first hypothesis test.

    57

     

              4-3-5-4) The results of the second hypothesis test.

    58

     

         4-3-6) Test of equality of error variance.

    60

     

         4-3-7) Test of normality of error sentences.

    61 Chapter 4-4 summary Research results. 64 5-3) Conclusion, discussion and comparison of research results. 66 4-5 Research limitations. 66 5-5 Research suggestions. 67

    5-5-1) Suggestions from the research results.

    67

    5-5-2) Suggestions for future research.

    67

     

    Resources. Farsi. 70. English sources. 72. Appendices. 76. English abstract. 88. List of tables. Appendix 1: Names of sample companies. .

    76

    Appendix No. 2: The maximum and minimum value of the final model variables.

    77

    Appendix No. 3: The results of the unit root test of the final model variables.

    77

    Appendix No. 4: The results of the collinearity test of the final model variables.

    79

    Appendix No. 5: The results of Limer's F test.

    79

    Appendix No. 6: The results of Hausman's test.

    81

    Appendix No. 7: The estimation results of the first hypothesis test.

    83

    Appendix No. 8: The estimation results of the second hypothesis test.

    84

    Appendix No. 9: The results of the residual sentence variance heterogeneity test.

    86

    Source:

    Persian sources

    1. Badri, Ahmad, Abdul Baqi, Abdul Majid, (1389), "Mali Econometrics", Nass Publications.

    2. Baharamghadam, Mehdi, Yazdi, Zeinab, Yazdi, Samia, (1390). "Investigating the effects of working capital management on the profitability of companies listed on the Tehran Stock Exchange", Journal of Management Accounting, 10: 75-63.

    3. Hasanpour, Shiva, (1388), "Investigating the effect of working capital strategies on stock returns", Financial Accounting Quarterly, 1: 1-19.

    4. Khaki, Gholamreza, (1378), "Research method with an approach to Dissertation Writing", Drate publishing cultural center.

    5.

Investigating the impact of bold working capital management on the wealth of shareholders of companies listed on the Tehran Stock Exchange