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

Meysam Kaviani, Reza Shahmanosuri, Maryam Batebi and Seyed Reza Seyednezhad Fahim

International Journal of Empirical Finance, 2014, vol. 2, issue 3, 130-136

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 firms 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.

Keywords: WCM; Policy; Free Cash Flow yield (search for similar items in EconPapers)
Date: 2014
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