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Sectorial Differentiation and Mean Reverting Tendency in Working Capital Policies

Author

Listed:
  • Kok, Dundar

    (Pamukkale University,)

  • Coskun, Ender

    (Pamukkale University,)

  • Ispir, M. Serdar

    (Pamukkale University,)

Abstract

In this paper we aim to specify the long term tendency of working capital in Turkey. Previous studies proved that working capital differentiated as per sectors and fluctuated over time. As found appropriate for analyzing the cross-section dependency and multiple structural breaks, we perform Panel KPSS test to analyze the cash conversion cycles of seven manufacturing firms in Istanbul Stock Exchange (ISE) between the years of 1990 and 2009. In this study we find that cash conversion cycles to be stationary for all the sub-sectors regarding with constant and trend model as well as for the whole of the sample. Regarding the constant model we find the same inclination for the whole of the sample and all the sub-sectors except for main metal sector. In sum, it is arguable that fluctuating originates from the sector’s itself while macroeconomic structure is temporal. Besides, working capital level is reverting at a specific mean, implying that there exist working capital policies as well as optimal working capital levels.

Suggested Citation

  • Kok, Dundar & Coskun, Ender & Ispir, M. Serdar, 2013. "Sectorial Differentiation and Mean Reverting Tendency in Working Capital Policies," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 4(4), pages 1-49, October.
    • Handle: RePEc:ris:buecrj:0134
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    More about this item

    Keywords

    Working Capital; Cash Conversion Cycle; Mean Reverting; Panel Unit Root Tests; Panel KPSS Test;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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