Aggressive, Conservative and Moderate Policy in Working Capital Management and Firm's Free Cash Flow Yield (FCFP) Evidence from Tehran Stock Exchange

Authors

  • Meysam Kaviani Department of Accounting, Lahijan Branch, Islamic Azad University, Lahijan, Iran
  • Reza Shahmanosuri Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran
  • Maryam Batebi Department of Accounting, Astaneh Ashrafieh Branch, Islamic Azad University, Astaneh Ashrafieh, Iran
  • Seyed Reza Seyednezhad Fahim Department of Accounting, Lahijan Branch, Islamic Azad University, Lahijan, Iran

Keywords:

WCM, Policy, Free Cash Flow yield

Abstract

This paper investigates the impact of Working Capital Management (WCM) policy on returns of the listed firms on Tehran Stock Exchange (TSE) in the period 2007-2011. To this effect, 57 companies were initially selected of which 8 companies, after closer examination, for lacking specific WCM policy were excluded from the sample, and the remaining 49 companies were actually subjected to further analysis. With a cash flow approach, free cash flow yield or FCF to price per share (FCF/P) was applied to measurement of firm's return. The results suggested that majority of the companies followed a conservative WCM policy (CP), and quite remarkably, CP was the only policy which showed a significant, but negative, association with free cash flow yield (FCFP). The two other policies, i.e. aggressive policy (AP) and moderate policy (MP), had no significant effect on FCF/P.

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Published

2014-09-03

How to Cite

Meysam Kaviani, Reza Shahmanosuri, Maryam Batebi, & Seyed Reza Seyednezhad Fahim. (2014). Aggressive, Conservative and Moderate Policy in Working Capital Management and Firm’s Free Cash Flow Yield (FCFP) Evidence from Tehran Stock Exchange. International Journal of Empirical Finance, 2(3), 130–136. Retrieved from https://rassorg.com/IJEF/article/view/32

Issue

International Journal of Empirical Finance (IJEF) - Volume 2, Issue 3

Section

Articles