The Relationship between Corporate Investments and Components of Working Capital: An Iranian Case

Purpose – The purpose of this paper is to investigate the relationship between corporate investments and components of working capital in companies accepted in Tehran Stock Exchange (TSE) for a period of 2002-2006. Design/methodology/approach- In this paper we will answer the question: Is there any relationship between corporate investments and components of working capital in companies listed in Tehran Stock Exchange (TSE)? We used panel data method for testing research hypothesis. In prior research was not applied the panel data procedure. Findings- The findings show that there is no relationship between corporate investments and components of working capital (net liquidity balance and working capital requirement). We also found that operating expenditure has relationship with the components of working capital. This result shows that companies listed in Tehran Stock Exchange (TSE) like to preserve in current status. Therefore, firms do not search for growth opportunities with the components of working capital. Practical implications – The findings have implications for managers to use components of working capital for corporate investments and do not use for the purpose of meeting their daily business transaction. Originality/value – The paper updates and extends previous research on corporate investments and components working capital of Iranian firms.