To Survey the Effect of Working Capital Policies (Investing & Financing) on Profitability Risk (Evidence from Tehran Stock Exchange)

Abstract

Managers can increase the firm value by using the effective working capital policies. The corporate va lue maximization strategy is executed with a focus on return and risk. This study investigates the relatio nship between aggressive/conservative working capital policies and profitability risk in Tehran stock exchange liste d companies. The sample includes 274 companies over the period 2006-2012. The results in all industries indicate a nega tive relationship between working capital investment policy and profitability risk measures. And there is a positive rel ationship between working capital financing policy and profitability risk measures. It means that, more the companies us e conservative working capital policy, it will lead to decreasing profitability risk. And more the companies use aggr essive working capital policy, it will lead to increasing profitability ri sk.