Working capital management and shareholders wealth

This paper investigates the effects of working capital management (WCM) on shareholders wealth of 401 firms listed at Tehran Stock Exchange (TSE) during 2001-2012. To measure criteria for WCM، financial data produced by the accounting system and some financial statement items were used. Based on portfolios formed، a market adjusted stock return is used to measure shareholders wealth and conditional distribution of variables. Also، panel regression analyses are conducted to infer the results. Conditional distribution of variables show that common measures of working capital management، like average receivable period and average inventory period، have a significant relation with stock returns. We also find that there is a positive significant relation between adjusted stock returns and a composite measure of working capital management optimality (WCMO) and working capital components.