EFFECTS OF AGGRESSIVE WORKING CAPITAL ON THE PERFORMANCE OF LISTED COMPANIES IN TEHRAN STOCK EXCHANGE

Abstract

Increase in financial flexibility and create value can be achieved through effective management and working capital efficiency when companies sharply reduce their dependence on external cash and use the existing liquidity for investment and corporate activities more often. Manufacturers can escape from a high rate of working capital by aggressive collecting accounts receivable and delaying payables to suppliers and lowering goods inventory levels. This paper is dealing with the impacts of aggressive working capital approach on the performance of listed companies in Tehran Stock Exchange. To investigate this approach, we tested eight hypotheses. As for this purpose, a total of 106 companies, during the period of 2007 to 2011, were analyzed through a combination of data analysis using Panel Data and Multiple Linear Regression. The results indicate that the aggressive strategy in assets and current liabilities increase return on assets and risk return on assets. The aggressive strategy in assets and current liabilities also increase return on equity and risk return on equity. Findings show the importance of aggressive strategy on firm performance and suggest that these findings can have an impact on decisions of managers and investors.