A study on the effect of working capital management on profitability on Cement and Petrochemical industries: Evidence from Tehran Stock Exchange

Khaksarian, F.

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Management Science Letters

ISSN 1923-9343 (Online) - ISSN 1923-9335 (Print) Quarterly Publication Volume 4 Issue 7 pp. 1571-1576 , 2014

A study on the effect of working capital management on profitability on Cement and Petrochemical industries: Evidence from Tehran Stock Exchange Pages 1571-1576 Download PDF

Authors: Fatemeh Khaksarian

Keywords: Cement industry, Petrochemical industry, Tehran Stock Exchange, Working capital

Abstract: This paper presents an empirical investigation to study the effect of working capital management on profitability on Cement and Petrochemical industries. The study uses the information of 24 firms from Cement industry and 19 firms from Petrochemical industry listed on Tehran Stock Exchange. There are two independent variables including the ratio of current assets on total assets as well as the ratio of current liabilities on total assets in this survey. In addition, there are two dependent variables including return on assets (ROA) and Tobin’s Q. The study also considers firm size, sales’ growth, financial leverage, gross domestic product growth as control variables. Using stepwise regression technique, the study confirms a positive and meaningful relationship between working capital criteria and profitability. In addition, the study confirms that as the ratio of current assets to total assets increases, ROA and Tobin’s Q will be reduced, which means lower profitability would be resulted. In addition, as financial leverage increases, ROA in both industries will reduce while Tobin’s Q will increase in Cement industry and will reduce in Petrochemical industry.

How to cite this paper

 Khaksarian, F. (2014). A study on the effect of working capital management on profitability on Cement and Petrochemical industries: Evidence from Tehran Stock Exchange.Management Science Letters , 4(7), 1571-1576.

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