The Effect of Working Capital Financing Strategies on Firm Profitability: An Application on Borsa Istanbul Manufacturing Firms

Article Information
Journal: Business and Economics Research Journal
Title of Article: The Effect of Working Capital Financing Strategies on Firm Profitability: An Application on Borsa Istanbul Manufacturing Firms
Author(s): Ersin Timur, Turhan Korkmaz
Volume: 12
Number: 3
Year: 2021
Page: 629-652
ISSN: 2619-9491
DOI Number: 10.20409/berj.2021.342
Abstract
Working capital management is among the most important issues of financial management, which includes investment and financing decisions for current assets. Working capital is an important area that business management, especially financial managers, should work on meticulously in order to fulfill the daily activities of a business without interruption and to ensure the continuity of business activities. In this context, it is of great importance for businesses to be managed with an effective working capital so that they can continue their activities without interruption, increase their profitability by reducing the risk and reach the targeted vision. However, the adoption and implementation of the optimal financing strategy for businesses significantly affects the efficiency and profitability in the management of current assets. In this study, it is aimed to investigate the relationship between working capital financing strategies and firm profitability. In addition, the factors affecting working capital management were tried to be determined. For this purpose, the financial data of the firms traded in the Borsa Istanbul (BIST) Manufacturing sector for the 2010-2019 periods were obtained. Selected data were tested econometrically with panel data analysis. The empirical findings obtained as a result of the study were analyzed, and as a result of the analysis, it was concluded that the factors affecting the profitability of companies following balanced financing strategy, conservative financing strategy, and aggressive financing strategy affect differently.

Keywords: Working Capital Management, Working Capital Financing Strategies, Profitability, Borsa Istanbul

JEL Classification: C33, G32, L25

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