Role of capital structure in moderating working capital management relation on valuation and risk

Jiyang Cheng, Ajay Kumar Patel, Hawazen Almugren, Varun Chotia () and Bhumika Gupta ()
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Jiyang Cheng: CPU - China Pharmaceutical University
Ajay Kumar Patel: IMS - Institute of Management Studies [Ghaziabad]
Hawazen Almugren: Princess Nourah Bint Abdulrahman University
Varun Chotia: Jaipuria Institute of Management [Noida]
Bhumika Gupta: LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], IMT-BS - MMS - Département Management, Marketing et Stratégie - TEM - Télécom Ecole de Management - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]

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Abstract: The objective of the study is to examine the relationships among working capital management (WCM), firm valuation, and risk in companies listed in G-7 countries from 2015 to 2024. The study evaluates the capital structure as a moderator of WCM's impact on firm value and risk. The result shows operational efficiency, as measured by receivable and payable turnover, significantly impacts firm value. The moderating effect of capital structure weakens the liquidity, receivables, and payables' impact on firm risk and has a minimal impact on the firm's value, especially in pre-crisis periods. Thus, the study suggests formulating strategies to optimise liquidity, improve the efficiency of managing receivables and payables, and use debt to maximise the firm's stability, especially during crises.

Keywords: Crisis; Risk; Firm value; Liquidity; Working capital; Capital structure (search for similar items in EconPapers)
Date: 2026-09
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Published in Finance Research Letters, 2026, 107, pp.110229. ⟨10.1016/j.frl.2026.110229⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05687197

DOI: 10.1016/j.frl.2026.110229

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