Working capital management is one of the critical areas within financial management because it directly influences the liquidity and profitability of companies and even the risk of bankruptcy for companies exposed to improper working capital management, despite having positive profitability. Working capital management revolves around current assets and current liabilities. Current assets represent a significant portion of a company's total assets. Excessive levels of current assets can lead to achieving investment returns below the norm. Conversely, companies with insufficient current assets will encounter shortages and operational challenges in their regular operations [1].

In financial management, efficient working capital management plays a pivotal role in upholding a company's financial well-being and ensuring the sustainability of its operations. This study explores the intricate relationship between working capital management, current assets, and current liabilities in the context of financial management. The goal is to shed light on how these factors impact a company's liquidity and profitability. As we delve deeper into the multifaceted aspects of working capital management and its repercussions on businesses, it becomes evident that striking the right balance between current assets and current liabilities is paramount to optimizing financial performance. This equilibrium guarantees that a company can meet its short-term obligations while simultaneously maximizing returns on investments. In the following sections, we will delve further into the constituents of working capital management, its significance for companies, and the potential ramifications of mismanagement. Furthermore, we will discuss the relevance of this study in the context of contemporary financial management practices. The theoretical foundations of working capital management are more closely associated with large corporations and developed economies. There is significant inequality, particularly when it comes to the study of financial management within banks. Banks in developing countries often face difficulties in accessing external financial resources, relying more on customer deposits compared to larger banks in developed nations. Therefore, working capital management plays a crucial role in the liquidity of banks in developing countries. Since working capital management is closely related to short-term financial planning, and liquidity, in general, serves as an indicator of short-term performance, effective and efficient working capital management is of vital importance [2].

This research aims to investigate the relationship between working capital management and the performance of banks in the Iranian capital market. One of the reasons banks hold reserves is their need for mandatory reserves. Banks also maintain reserves to meet unforeseen liquidity needs [3]. Reserves can be categorized into two types: precautionary excess reserves, which banks hold to mitigate uncertainty, and excess reserves beyond the precautionary level [4]. Since the 2008 financial crisis, banks have increased their excess reserves. Banks now find themselves in an environment where accumulating cash can be more attractive, as the cost of holding excess cash is significantly lower than before the crisis [5].

In short-term markets, a cash shortage has emerged and banks have faced severe financial difficulties. Throughout the years, the belief that cash management affects a bank's financial capacity has become more prominent [6]. The high risk of losing loans is associated with low cash levels. Therefore, there may be a level of cash resources where a reduction in cash accumulation negatively affects the bank's profitability. As a result, the relationship between working capital management and bank profitability is not linear but rather concave, and thus, it can be better captured by a second-degree relationship. Given the above, extensive research has been conducted on this subject. Dang et al. [7] demonstrated that greater cash accumulation reduces bank profits when the level of uncertainty is low. However, there is a high uncertainty point where increased cash accumulation improves bank profitability. Fernandes et al. [8] found a non-linear relationship between the Cash Conversion Cycle (CCC) and bank profitability. Asubonteng and Kong [9], in their study on role of the bank value in cash accumulation in Ghana, concluded that bank value has a positive and significant impact on the cash accumulation of global banks in Ghana. Similarly, their study showed that profitability, working capital, and growth all positively contribute to bank cash accumulation.

Sasaki and Suzuki [10] found that bank health restricts the financial capacity of companies and affects the cash accumulation and investment of companies in a bank-centric market. Kalanidis [11], in a study titled "the impact of liquidity on bank profitability after the european banking crisis," found that banks need to maintain higher levels of liquidity with their capital reserves and take action to reduce their credit risk in their investments and financial gap, which creates constraints on their financing methods.

Given the aforementioned considerations, this research aims to investigate the relationship between working capital management and profitability in the banks operating in the capital market of the country.

In this study, to examine and test the hypotheses, the following regression models, adapted from Fernandes et al. [8], have been employed:

PROi,t = β0 + β1Cashi,t + β2CCCi,t + β3CCC2i,t + ∑ βj Xi,t + λt + ηi + εi,t.

In the above model, the dependent variable (PRO) represents profitability, which is measured using two proxies, Return on Assets (ROA) and Return on Equity (ROE). The independent variables are calculated using two proxies as well, CCC and Cash Ratio (CASH). Finally, the control variables include Firm Size (Size), Log of Total Assets (LnAssets), Credit Risk (CRISK), the ratio of Loan Loss Reserves to Total Loans (LLR), Leverage (LEV), Bank Age (Age), and Growth Rate (GROWTH) in interest income.

One of the aims of this research has been to investigate working capital management, with a particular focus on empirical theories related to working capital management in large companies and developed settings. financial management in banks shares many similarities with large corporations. However, there is a significant difference that studying financial management in banks highlights. Given that banks in developing countries face difficulties in accessing external financial resources, they rely more heavily on customer deposits compared to large banks in developed countries. Therefore, working capital management plays a crucial role in the liquidity of banks in developing countries. Additionally, since capital-related problems in circulation are among the leading causes of bank failures, this research has investigated the relationship between effective working capital management and the profitability of banks accepted in our country's capital market.

In this regard, two hypotheses were formulated to examine the relationship between working capital management and performance based on profitability in banks. The results indicate that, statistically, an increase in the liquidity ratios did not have a significant impact on profitability. One possible reason for this is that these ratios are primarily used in manufacturing companies to determine working capital policies. In the banking industry, the analysis of these ratios is usually used for liquidity risk assessment and control. The lack of attention by managers to the analysis of these ratios about bank performance may have led to the lack of a significant correlation between them. This analysis is not consistent with the findings of Fernandes and colleagues [8].

Furthermore, the results show that an increase in the CCC in profitability ratios has led to significant and positive changes statistically. One can explain this by the fact that Iranian banks still owe a significant portion of their profitability to providing facilities to their customers. Therefore, providing facilities to customers over a longer period leads to increased bank risk in working capital management, or, in other words, bold strategies. Accordingly, it is expected that an increase in risk will also lead to increased bank returns, which is consistent with the results of Fernandes and colleagues [8]. In conclusion, based on these results, it is recommended that senior bank managers, like those in other developing and developed countries, do not overlook working capital management in their analysis of profitability. It is suggested that they take steps to working capital management and accumulate more cash through the sale of non-listed participation securities to ensure liquidity.