The Effect of Working Capital Management on Accelerating the Speed of Achieving Optimal Liquidity in the Banking Industry: Generalized Moments Approach (GMM)

Articles in Press

Document Type : Original Article

Authors

• Mohammad Hosein Fatheh ¹
• mohsen najafi ²

¹ Assistant Professor, Department of Accounting, Payame Noor University, Tehran, Iran.

² MSc., Department of Accounting, Payame Noor University, Tehran, Iran

https://doi.org/10.22067/mfe.2025.91808.1503

Abstract

The aim of this study is to investigate the effect of working capital management on accelerating the speed of achieving optimal liquidity in the banking industry. This study is applied and from a methodological perspective, the correlation is of a causal (post-event) type. The statistical population of the study is all banks listed on the Tehran Stock Exchange, and using the systematic exclusion sampling method, 10 banks were selected as the research sample and were examined over a 9-year period between 1394 and 1402. The results of testing the research hypotheses showed that in fact, the liquidity conversion cycle (working capital management) has a direct effect on achieving optimal liquidity in banks and increases the speed of adjusting cash holdings in the bank. Of the two subsets of working capital management (liquidity conversion cycle), namely the receivables collection period and the debt payment period, it was observed that the receivables collection period also has a direct effect on the speed of achieving optimal liquidity, but the debt payment period has no statistical effect on the speed of achieving optimal liquidity in the sample of the present study.

Keywords

• Working capital management
• optimal liquidity
• receivables collection period
• debt payment period
• cash conversion cycle

Main Subjects

• Bank