Abstract

This study investigates the effect of financial distress and market share on working capital policy with regard to product market competition. For this purpose, the research regression models are examined based on panel data with fixed effects by using data from 122 companies listed on Tehran Stock Exchange for the period of 2007 to 2013. The results suggest that financial distress has an insignificant relationship with working capital requirement, but market share has a significant negative relationship with it. In other words, the firms with high market share will adopt working capital aggressive policy. Furthermore, other results reveal that product market competition does not have a significant effect on the relationship of financial distress and market share with working capital requirement. In fact, it can be concluded that working capital policy is not affected by product market competition. So, market competition like financial distress is not regarded as an important and effective factor on Iranian firm’s working capital policy.