EXAMINING FIRM PERFORMANCE AS A MEDIATOR OF THE EFFECTS OF WORKING CAPITAL AND TOTAL RISK ON SUSTAINED GROWTH WITH THE EFFECTIVE TAX RATE AS A MODERATING VARIABLE

Abstract

This study examines the role of firm performance as a mediator in the relationship between working capital and total risk on sustained growth, with the effective tax rate as a moderating variable. The primary issue addressed is how firms can manage working capital and risk to achieve long-term growth, considering the impact of tax policies. The objective is to provide a deeper understanding of these dynamics and how tax rates influence the ability of firms to reinvest in growth initiatives. This research utilizes a library research method, analyzing secondary data from books, scholarly articles, and prior research related to working capital, risk management, and firm performance. The findings indicate that effective working capital management and risk mitigation enhance firm performance, which in turn fosters sustained growth. Furthermore, the study highlights that favorable tax policies positively moderate this relationship, offering firms greater financial flexibility to invest in expansion. In conclusion, firms that efficiently manage working capital, mitigate risks, and operate in tax-friendly environments are better positioned for long-term growth and profitability. The research suggests that effective tax policies can be leveraged by business leaders to enhance financial performance, enabling greater reinvestment into growth initiatives. By understanding the interconnectedness of working capital management, risk mitigation, and tax strategies, this study provides valuable insights for business leaders and policymakers to optimize financial strategies for sustainable business success and long-term profitability. Furthermore, the findings encourage the adoption of proactive financial planning to navigate the complexities of working capital and risk management for sustained growth.