Investigating the Relationship between Working Capital Management and Stock Price Crash Risk

Authors

  • Ebrahim Mansoori Department of Economics and Finance, Kurdistan Business School, University of Kurdistan Hewler, Kurdistan Region – F.R. Iraq http://orcid.org/0000-0001-9155-1235
  • Masood Elyasi Department of Economics and Finance, Kurdistan Business School, University of Kurdistan Hewler, Kurdistan Region – F.R. Iraq
  • Rahim Mohammadi Department of Economics and Finance, Kurdistan Business School, University of Kurdistan Hewler, Kurdistan Region – F.R. Iraq

DOI:

https://doi.org/10.25079/ukhjss.v3n1y2019.pp28-35

Keywords:

Stock Price Crash Risk, Tehran Stock Exchange, Working Capital

Abstract

The main purpose of this study is to investigate the effect of working capital management on stock price crash risk. The sample includes 103 Iranian firms listed on the Tehran Stock Exchange from 2013 to 2017. Panel data analysis with fixed effect estimation has been used to analyze the relationship between working capital management and stock price crash risk. Cash conversion cycle, working capital requirement, current, and quick ratios were applied as comprehensive measures for working capital management, and Hutton’s model was applied as a measure for stock price crash risk. The results indicate that there is a negative relationship between working capital indicators and stock price crash risk. Therefore, managers can use working capital strategies to decrease the risk of the stock price crash. Furthermore, asymmetry information may, in fact, increase a manager’s incentive to use working capital strategies to reduce the stock price crash risk.

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Author Biographies

  • Ebrahim Mansoori, Department of Economics and Finance, Kurdistan Business School, University of Kurdistan Hewler, Kurdistan Region – F.R. Iraq

    Ebrahim Mansoori is an Assistant Professor in Finance at the Kurdistan Business School (KBS), University of Kurdistan-Hawler (Kurdistan region, Iraq). Ebrahim holds a PhD degree in Corporate Finance from the University of Science Malaysia (USM), a Master-Degree in Accounting from Shiraz University, Shiraz (Iran), and a Bachelor of Accounting at Allame Tabatabayi University (Tehran-Iran). Before joining UKH, Ebrahim has worked as a lecturer at the School of Accounting, Mahabad Azad University, Iran, for 9 years from 2002 to 2010. Moreover, Ebrahim has one year experience as Financial Manager from 2006 to 2007 and two years’ experience as vice president of Financial and Administrative affairs from 2007 to 2009 at Mahabad Azad university.Then he joined USM as a PhD research student from 2010 to 2014. In addition, Ebrahim has worked as head of the Accounting department from 2014 to 2018 at Mahabad Azad University before joining UKH. 

  • Masood Elyasi, Department of Economics and Finance, Kurdistan Business School, University of Kurdistan Hewler, Kurdistan Region – F.R. Iraq

    Masood Elyasi, Master student, Department of Accounting, Islamic Azad University, Mahabad branch, Mahabad, Iran.

  • Rahim Mohammadi, Department of Economics and Finance, Kurdistan Business School, University of Kurdistan Hewler, Kurdistan Region – F.R. Iraq

    Rahim Mohammadi, Master student, Department of Accounting Islamic Azad University, Mahabad branch, Mahabad, Iran.

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Published

2019-05-23

Issue

Vol. 3 No. 1 (2019): ISSUE FOUR

Section

Research Articles

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How to Cite

Investigating the Relationship between Working Capital Management and Stock Price Crash Risk. (2019). UKH Journal of Social Sciences, 3(1), 28-35. https://doi.org/10.25079/ukhjss.v3n1y2019.pp28-35

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