The role of the AFA coefficient as a new criterion in the long-run liaison between corporate liquidity and bank credit: Evidence from Turkey. Issue 2 (11th June 2018)

• Record Type: Journal Article
• Authors: Acikgoz, Ali Faruk; Apak, Sudi; Apergis, Nicholas; Uzunoglu, Sadi
• Is Part Of: Journal of financial reporting & accounting. Volume 16:Issue 2(2018)
• Page Start: 274
• Page End: 291
• Publication Date: 2018-06-11
• Subjects: Bank credit -- afa coefficient -- Corporate liquidity -- Net working capital; Finance -- Research -- Periodicals; Accounting -- Research -- Periodicals; 657.3
• DOI: 10.1108/JFRA-01-2017-0001
• Languages: English
• ISSNs: 1985-2517

Abstract

Abstract : Purpose: This paper aims to focus on the absence of a direct criterion for the ideal level of net working capital (NWC) for whichAcikgoz (2014 ) theoretically demonstrates that this NWC can be treated in a manner that allows the assessment of repayments. The study presents and discusses a new multiplier (i.e. the afa coefficient), defined as the ratio of cash equivalents ratio to NWC, measured as the percentage of short-term liabilities (Acikgoz, 2014 ). In other words, the study explores whether NWC could be an indicator of the ratios of corporate short-term bank credit to STL and of bank credit to total assets. Design/methodology/approach: Sectoral panel regressions are used in the case of Turkey, spanning the period 1996-2013, on data obtained from the Central Bank of Turkey. Through second-generation panel unit root tests for cross-section dependence and panel cointegration methodologies, the results illustrate the statistical significance of the CD statistics, indicating the presence of cross dependence, the presence of non-stationary variables and the presence of a long-run association for the variables under study. Findings: The findings document that a transformed variable of NWC is more substantive than the explicatory quality of the current ratio and may potentially be used in the prediction of bank credit in corporate liabilities. Originality/value: The afa coefficient shows the ratio of liquid assets to NWC as a percentage of STL. The results illustrate that this coefficient plays a significant role for corporate bank credit usage in the case of the Turkish sectoral analysis.