Effects of Working Capital Management on Profitability: the Case for Selected Companies in the Istanbul Stock Exchange

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCE STUDIES

Vol 2, No 2, 2010 ISSN: 1309-8055 (Online)

EFFECTS OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY: THE

CASE FOR SELECTED COMPANIES IN THE ISTANBUL STOCK EXCHANGE (20052008)

Hasan Agan KARADUMAN

Yıldız Technical University

Faculty of Economics and Administrative Sciences

Department of Economics, Beşiktas, Istanbul, Turkey

E-mail: hagan@yildiz.edu.tr

Halil Emre AKBAS

Yıldız Technical University

Faculty of Economics and Administrative Sciences

Business Administration Department, Beşiktas, Istanbul, Turkey

E-mail: eakbas@yildiz.edu.tr

Arzu OZSOZGUN

Yıldız Technical University

Faculty of Economics and Administrative Sciences

Business Administration Department, Beşiktas, Istanbul, Turkey

E-mail: ozsozgun@yildiz.edu.tr

Salih DURER

Yıldız Technical University

Faculty of Economics and Administrative Sciences

Business Administration Department, Beşiktas, Istanbul

E-mail: durer@yildiz.edu.tr

Abstract

Working capital management is one of the essential determinants of firms’ market value because it

directly affects profitability. And, working capital management is also extremely crucial from the

point of firms’ sustainability. Hence, firms should establish a fine balance between profitability

and risk when it comes to managing working capital. This paper mainly aims to provide some

empirical evidence on the effects of working capital management on the profitability of selected

companies in the Istanbul Stock Exchange for the period of 2005-2008. The panel data methods

are employed in order to analyze the mentioned effects.

Key Words:

Working capital management, profitability.

JEL Classification: G29, G39

1. INTRODUCTION

Traditionally corporate finance involves decisions about three fields: capital budgeting, capital

structure and working capital management. To handle capital budgeting and capital structure is

about the management of long-term capital and attracts more attention...