We are interested in the behavior of firms' net working capital, inventory turnover and receivables turnovers when monetary policy is contractionary, and check whether certain firm characteristics help to insulate the firms from the effects of tighter monetary policy.
manufacturing firms' short-term financial management measures including net working capital, inventory turnover and receivables turnover are examined over the 1971-2005 period.
* What is the impact of monetary policy on firms' short-term financial management measures including net working capital, inventory turnover and receivables turnover?
We look at the effects of the traditional credit channel through the monetary policy contractions, and the accounts receivables turnover is examined to account for the trade credit channel.
We do similar analyses for "Inventory turnover", "Receivables turnover", and "Total asset turnover" by using the following regression equations:
Receivables Turnover = [c.sub.0] + [c.sub.1] Size + [c.sub.2] Profitability + [c.sub.3] Tangibility + [c.sub.4] Markettobook + [c.sub.5] Leverage + [c.sub.6] Contractionary + [c.sub.7] (Leverage * Contractionary) + [c.sub.8] Medium Industry + [c.sub.9] Heavy Industry + [c.sub.10] Time + [epsilon] (3)
The median values of inventory turnover, receivables turnover, and total asset turnover are 1.16, 1.62, and 0.33, respectively.
Table 5 shows the results of the robust regressions that explain firms' receivables turnover ratios by firm characteristics, the medium and the heavy industry dummies, the time variable, the "Contractionary" dummy, and the Leverage *Contractionary interaction term.
manufacturing firm data were used to test the effects of monetary policy on different measures of working capital management, namely net working capital, inventory turnover, receivables turnover, and asset turnover.
As the firm size increased (i.e., increased firm revenues), we find firms had higher inventory turnover and receivables turnover during both expansionary and contractionary policy periods compared to smaller firms, i.e.
Firms with higher tangibility also seem to have higher inventory turnover and receivables turnover, irrespective of expansionary or contractionary policy periods.