Title: Economic uncertainty and working capital management: evidence from Turkey

Authors: Güneş Topçu

Addresses: Faculty of Political Science, Çanakkale Onsekiz Mart University, Turkey

Abstract: The purpose of this paper is to examine the impact of economic uncertainty on the working capital management (WCM) of 96 Borsa Istanbul (BIST)-listed manufacturing firms from 2005Q1 to 2020Q4. A novel economic policy uncertainty (EPU) index for Turkey was used to measure economic uncertainty, and the cash conversion cycle (CCC) was used to measure WCM. Panel data were analysed, and the parameters of regression equations were estimated using fixed or random effects methods. The empirical results obtained indicate that EPU has a negative impact on working capital (WC) efficiency. Specifically, EPU has a significant and increasing impact on the CCC and its components, and the decrease in WC efficiency is demand related. To enhance WC efficiency, managers should maintain credit facilities, better manage the demand side, extend supplier payments, insure credits and reduce accumulated debts.

Keywords: working capital; economic policy; uncertainty; efficiency; Turkey; liquidity; panel data.

DOI: 10.1504/IJEPEE.2023.134812

International Journal of Economic Policy in Emerging Economies, 2023 Vol.18 No.1, pp.4 - 22

Received: 24 Sep 2021
Accepted: 20 Feb 2022
Published online: 13 Nov 2023 *