The relationship between stock return volatility and working capital accruals: A real options-based investment approach

The purpose of this study was to examine the effects of stock return volatility as an indication of the environmental uncertainty on the working capital accruals. This research is applied and the use of Ex-Post Facto approach. In this study, according to real options-based investment approach was predicted that high stock return volatility will be reduced accruals. For this purpose, a sample of 108 companies listed in Tehran Stock Exchange have been selected and during the period of beginning of the year 2011 until the end of 2014 year were studied. To calculate some variables have also been used the data of years 2010 and 2015. The results show that there has been a negative relationship between the volatility of stock returns and working capital accruals, And financial distress of firms will reduce the intensity of this relationship. One of the main reasons for reducing the intensity of the negative relationship between stock return volatility and accruals in the firms under financial distress could be the motivation transfer risk by investors. Also contrary to what was anticipated, high operating cycle is not caused to increase the intensity of the negative relationship between stock return volatility and working capital accruals.