Title: The influence of firms' capital expenditure on firms' working capital management

Authors: Mahdi Salehi; Reza Ghorbanzadeh

Addresses: Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran ' Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

Abstract: Organisations are basically dealing with three kinds of financial decisions including capital structure decisions, capital budgeting decisions, and decisions regarding working capital management. Among all, working capital management is one of the important components of corporations, particularly when it participates in firm's profitability and liquidity. This study aims to investigate the influence of capital expenditure on working capital management of companies listed on the Tehran Stock Exchange. In order to assess working capital, this study uses net liquidity balance and working capital requirement. In this regard, a multiple regression model is developed for 155 companies during 2008-2013. The obtained results confirm the previous literature indicate that firm's operating cash flow have a significant correlation with working capital management. The obtain findings would develop the basis of working capital management knowledge, would help companies in effective working capital management, and would improve growth opportunities related to capital expenditure.

Keywords: capital expenditure; operating cash flow; net liquidity balance; NLB; working capital management; profitability; liquidity.

DOI: 10.1504/IJEBR.2016.076179

International Journal of Economics and Business Research, 2016 Vol.11 No.3, pp.287 - 301

Received: 01 Jul 2015
Accepted: 17 Jan 2016
Published online: 27 Apr 2016 *

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