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THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES

Year 2018, Volume: 8 Issue: 1, 18 - 23, 30.12.2018
https://doi.org/10.17261/Pressacademia.2018.973

Abstract

Purpose - This study aims to investigate the effect of business cycle on the relation between working capital management and corporate performance.

Methodology - We examine the relation between working capital and profitability under economic down and upturns, on energy firms which are traded on Istanbul Stock Exchange and included in BISTELKT index. Working capital is measured by cash conversion cycle. EBIT to total assets ratio is used to represent profitability and business cycle is modeled by gross domestic products. Data is on quarterly basis from 2012 to 2018.

Findings - The analysis shows that there is a negative relation between cash conversion cycle and profitability during economic growth, while a reverse relation exists in economic recession periods.

Conclusion- The study shows that the efficient working capital management is important in terms of the firms' profitability, and must be included in financial planning especially in the times of economic upturns.

References

  • Wang, Y.J., (2002). Liquidity management, operating performance and corporate value: evidence from Japan and Taiwan. J.Multinational Financial Manage. 12 (2), 159–169.
  • Deloof, M., (2003). Does working capital management affect profitability of Belgian firms? J. Business Finance Acc. 30 (4), 573–587.
  • Garcia-Teruel, P.J., Martinez-Solano, P., (2007). Effects of working capital management on SME profitability. Int. J. ManagerialFinance 3 (2), 164–177.
  • Gill, A., Biger, N., Mathur, N., (2010). The relationship between working capital management and profitability: evidence from theUnited States. Business Economics J. 10, 1–9.
  • Enqvist, J., Graham, M., Nikkinen, J,. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance 32(2014) 36-49.
  • Baños-Caballero,S., García-Teruel, P..J, Martínez-Solano, P., (2014). Working capital management, corporate performance, and financial constraints. Journal of Business Research 67 (2014) 332–33.
  • Aktas, N., Croci, E., Petmezas D., (2015). Is working capital management value-enhancing? Evidence from firm performance and investments. Journal of Corporate Finance 30 (2015) 98–113.
  • Einarsson, T., Marquis, M.H., 2001. Bank intermediation over the business cycle. J. Money Credit Banking 33 (4), 876–899.
  • Lazaridis, I., Tryfonidis, D., 2006. Relationship between working capital management and profitability of listed companies onthe Athens Stock Exchange. J. Financial Management Anal. 19 (1), 26–35.Azadegan and Pai (2008)
  • L-Shubiri, F. N. (2015). The Impact of Economic and Financial Variables on Cash Conversion Cycle of Energy, Oil and Gas Sectors Listed in Muscat Security Market. International Journal of Energy Economics and Policy Vol. 5, No. 1, 2015, pp.174-181, ISSN: 2146-4553.
  • Dritsaki, C., Dritsaki, M. (2014), Causal relationship between energy consumption, economic growth and CO2 emissions: A dynamic panel data approach. International Journal of Energy Economics and Policy, 4(2), 125-136.
Year 2018, Volume: 8 Issue: 1, 18 - 23, 30.12.2018
https://doi.org/10.17261/Pressacademia.2018.973

Abstract

References

  • Wang, Y.J., (2002). Liquidity management, operating performance and corporate value: evidence from Japan and Taiwan. J.Multinational Financial Manage. 12 (2), 159–169.
  • Deloof, M., (2003). Does working capital management affect profitability of Belgian firms? J. Business Finance Acc. 30 (4), 573–587.
  • Garcia-Teruel, P.J., Martinez-Solano, P., (2007). Effects of working capital management on SME profitability. Int. J. ManagerialFinance 3 (2), 164–177.
  • Gill, A., Biger, N., Mathur, N., (2010). The relationship between working capital management and profitability: evidence from theUnited States. Business Economics J. 10, 1–9.
  • Enqvist, J., Graham, M., Nikkinen, J,. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance 32(2014) 36-49.
  • Baños-Caballero,S., García-Teruel, P..J, Martínez-Solano, P., (2014). Working capital management, corporate performance, and financial constraints. Journal of Business Research 67 (2014) 332–33.
  • Aktas, N., Croci, E., Petmezas D., (2015). Is working capital management value-enhancing? Evidence from firm performance and investments. Journal of Corporate Finance 30 (2015) 98–113.
  • Einarsson, T., Marquis, M.H., 2001. Bank intermediation over the business cycle. J. Money Credit Banking 33 (4), 876–899.
  • Lazaridis, I., Tryfonidis, D., 2006. Relationship between working capital management and profitability of listed companies onthe Athens Stock Exchange. J. Financial Management Anal. 19 (1), 26–35.Azadegan and Pai (2008)
  • L-Shubiri, F. N. (2015). The Impact of Economic and Financial Variables on Cash Conversion Cycle of Energy, Oil and Gas Sectors Listed in Muscat Security Market. International Journal of Energy Economics and Policy Vol. 5, No. 1, 2015, pp.174-181, ISSN: 2146-4553.
  • Dritsaki, C., Dritsaki, M. (2014), Causal relationship between energy consumption, economic growth and CO2 emissions: A dynamic panel data approach. International Journal of Energy Economics and Policy, 4(2), 125-136.
There are 11 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Oktay Tas This is me 0000-0002-7570-549X

Cigdem Guleroglu Atac This is me 0000-0003-2367-0878

Publication Date December 30, 2018
Published in Issue Year 2018 Volume: 8 Issue: 1

Cite

APA Tas, O., & Atac, C. G. (2018). THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES. PressAcademia Procedia, 8(1), 18-23. https://doi.org/10.17261/Pressacademia.2018.973
AMA Tas O, Atac CG. THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES. PAP. December 2018;8(1):18-23. doi:10.17261/Pressacademia.2018.973
Chicago Tas, Oktay, and Cigdem Guleroglu Atac. “THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES”. PressAcademia Procedia 8, no. 1 (December 2018): 18-23. https://doi.org/10.17261/Pressacademia.2018.973.
EndNote Tas O, Atac CG (December 1, 2018) THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES. PressAcademia Procedia 8 1 18–23.
IEEE O. Tas and C. G. Atac, “THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES”, PAP, vol. 8, no. 1, pp. 18–23, 2018, doi: 10.17261/Pressacademia.2018.973.
ISNAD Tas, Oktay - Atac, Cigdem Guleroglu. “THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES”. PressAcademia Procedia 8/1 (December 2018), 18-23. https://doi.org/10.17261/Pressacademia.2018.973.
JAMA Tas O, Atac CG. THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES. PAP. 2018;8:18–23.
MLA Tas, Oktay and Cigdem Guleroglu Atac. “THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES”. PressAcademia Procedia, vol. 8, no. 1, 2018, pp. 18-23, doi:10.17261/Pressacademia.2018.973.
Vancouver Tas O, Atac CG. THE WORKING CAPITAL MANAGEMENT EFFECT ON PROFITABILITY OF ENERGY COMPANIES IN TURKEY, BASED ON DIFFERENT BUSINESS CYCLES. PAP. 2018;8(1):18-23.

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