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Working capital management, firm performance and macroeconomic factors: Evidence from Iran

Abstract This paper investigates the impact of working capital management (WCM) on firm performance among listed Iranian manufacturing firms, focusing on the direct and moderating roles of inflation and GDP variables. This study uses the ordinary least squares with robust standard errors to analyze panel data covering the period 2010–2016. Two-stage least squares with robust standard errors is also used to control the endogeneity problem. The results show that the cash conversion cycle (CCC) is negatively related to return on assets and to refined economic value added (REVA). That is, the shorter time the span between an expenditure to purchase raw materials and the collection of the receivables for sold goods, the higher the performance. However, when endogeneity problem is controlled for, CCC loses its relationship to REVA. Macroeconomic variables are positively and significantly related to ROA, but only inflation is significantly related to REVA. Moreover, macroeconomic factors do not moderate the relationship between WCM and firm performance.

PUBLIC INTEREST STATEMENT
This study contributes a determination of the moderating role of macroeconomic factors (GDP and Inflation) for the relationship between WCM and firm performance. Further, the relationship macroeconomic factors have to that performance, has been investigated. The findings show that the adoption of an aggressive working capital strategy leads to the improvement of accountingbased performance. However, WCM is not significantly related to economics-based performance, while the endogeneity is controlled. To the best of the authors' knowledge, limited attention has been paid to WCM and economics-based firm performance, and their relevant endogeneity problem. Based on the findings, macroeconomic factors have different direct consequences for short-term and long-term performances of Iranian listed manufacturing firms. Also, these factors don't moderate the relationship between cash conversion cycle and relevant firm performance measures. Based on the literature reviewed, this paper is a pioneer in investigating the moderating role of macroeconomic condition in the relationship between WCM and firm performance, as well as evaluating the influence of WCM on economics-based performance concept.

Introduction
The business of a firm involves a series of activities performed in an established manner, and this forms their general business operations. To conduct their business effectively and efficiently, they must adopt and follow a set of techniques and policies. Working capital management (WCM) foregrounds the short term and the improvement of processes, beginning with purchases of material and payments to suppliers and ending in the collection of receivables from the customer. WCM is a key parameter for policy making, and it influences multiple aspects of business, including profitability and liquidity. The authors' calculations indicate that the average value of accounts receivables, accounts payables, and inventories in Iranian non-financial listed firms from 2010 to 2016 were 21%, 9%, and 17% of total firm assets, respectively. Because WCM deals with the central business processes of firms and is closely tied to firms' financial decision, it is considered to have a significant influence on firm performance.
In the last two decades, many scholars turned to investigation of the relationship between WCM and firm performance (Bhatia & Srivastava, 2016;Lyngstadaas & Berg, 2016). Studies in this area have been concentrated on accounting-based measures of performance. However, these measures give an incomplete picture, as Stewart (1994, p. 75) stated that economic value added (EVA) is rated in that publication as being nearly 50% more accurate than the closest accounting-based competitor (including ROA) for explaining changes in shareholder wealth. Unlike accounting-based performance measures, which are generally recognized, economics-based measures of performance tend to be exclusive measures that have not been received sufficient attention in the fields of finance and accounting.
The authors believe that Iran has specific economic and institutional characteristics which justify the importance of this research. High inflation is considered as an important indicator of economy in Iran. According to the World Bank database, the average inflation in Iran was 19.5% between 2010 and 2016 (Word Bank Site, Iran Overview). In 2016, Iran ranked 22 among the 191 evaluated countries (IMF report). Further, Iran has been exposed to recession in many years. During the downturn, an increase occurs in the speed of corporate asset turnover, as well as the expected time to sell the goods while the collection of receivables may decrease. Furthermore, the firm margin decreases and cash inflow is weakened in the markets where there is no complete competition due to a drop in demand. In addition to these general cases, a number of major shocks in Iranian economy such as rising exchange rates or prices for energies may have put serious pressure on the working capital of Iranian companies.
In Iran's economy, where the financial system relies heavily on the banking system, most of the resources of the firm finance through the banks; In addition, many of the firms are indebted to the bank system, and some are overdue (Shayeganfard, 2012). As a result, they are not able to refinance from the banking system to finance their working capital until settling their debts completely, which increases the importance of working capital management (WCM). Short-term bonds are considered as one of the most well-known financial instruments which are widely used in the world, although it is not used in Iran due to Islamic religious issues. Although few distinct types of these bonds such as participation bonds or project financing bonds are used in Iran, many of the common types of bonds such as zero-coupon bond, put bonds, held-to-maturity bonds, convertible bonds, and variable-rate bonds are not used in Iran. Further, other short-term financing instruments such as receivable securitization, asset-based lending, floor plan financing, factoring, and premium financing are not common in Iran. Due to the limitations of banking financing and other financing methods, Iranian firms have been exposed to the problem of working capital financing (short-term financing), in which efficient and effective working capital management is required. In this study, a number of Iranian firms were examined to analyze the relationship between WCM and firm financial performance.
The first question here is whether or not effective WCM contributes to firms' accounting-based and economics-based performances for listed Iranian manufacturing firms. This study extends the existing literature by expanding knowledge of the impact of WCM on economics-based performance measures. By investigating the effects of WCM on these measures, the influences of WCM on the accounting-based (that is, representatives of short-term performance) and economicsbased (emphasizing firms' long-run performance and their value) performance measures and their comparison appear. Certain influences of WCM on financial performance measures have been investigated empirically in previous studies (e.g., Deloof, 2003;Lyngstadaas & Berg, 2016;Abuzayed, 2012, which have focused on accounting-based and market-based performance measures). Considering the special economic and institutional conditions of Iran (which is discussed in the previous paragraph), the evaluation of the relationship between WCM and the firm financial performance including both accounting-based and economics-based contributes to the literature, even the relationship between WCM and accounting-based performance which was extensively examined in previous studies.
As time passes, the effects of macroeconomic factors on finance and accounting have increased in prominence. In developing countries such as Iran, the financial performance of firms and their financial position have been dramatically influenced by macroeconomic conditions. Empirical findings also support the issue that macroeconomic factors such as gross domestic product (GDP), the inflation rate, the exchange rate, the price of crude oil, and other relevant factors have significant influences on firm performance and WCM (García-Teruel and Martinez-Solano, 2007;Mathuva, 2010). The role of GDP and inflation rate in the literature related to WCM and firm financial performance (especially accounting-based performance) has attracted a lot of attention (e.g., Chiou, Cheng, & Wu, 2006;Deloof, 2003;Enqvist, Graham, & Nikkinen, 2014;Mathuva, 2010;Shi, Zhu, & Yang, 2016). GDP provides a meaningful content about the overall macroeconomic condition of any country. In addition, it is considered as a comprehensive measure of economic performance (Bregar, Rovan, & Pavšič, 2008). Furthermore, it is a single number which can provide a general picture of all economic activities (Konchitchki & Patatoukas, 2014). The overall macroeconomic condition can be viewed as either booming, which is determined by a higher GDP by which firms are able to improve their profitability and productivity throughout the operations and their relevant decisions, or failing economy, which is opposite to booming economy. For example, the failing economy condition may lead to the prolongation of the receivable collection period. In addition, in this condition, customers' demand decreases, or firms attempt to maintain a higher level of inventory, both leading to an increased inventory turnover period. Further, firms fail to pay off the short-term obligations on a timely basis, all of which play a significant role in WCM and firm performance (Golverdi and Mehrabanpour, 2017).
Inflation is considered as another factor which was considered in literature, which is an index which provides relevant awareness about the purchasing power of national currency and measures the economic stability. During the inflationary period, all different groups (e.g., suppliers, manufacturers, and customers) are affected by. The argument about the impact of inflation on WCM and firm performance can be that it increases the price of inputs in production, including raw material and overhead costs, which can influence the volume of production. In this condition, firms may prefer to accumulate finished goods to gain additional benefits in the future which increases the inventory turnover period. In response to the increase in the production cost, firms may increase the sales price, which might bring about an increase in the operating income, that may be regarded as perfidious and temporary. Furthermore, inflation can negatively influence the purchasing power of customers, which subsequently affects the credit policies and receivable collection period of the firm (Golverdi and Mehrabanpour, 2017). Based on the above and similar arguments, it is logically expected that inflation plays a significant role in firm performance and WCM.
Considering the significant role of GDP and inflation with respect to the financial performance and WCM, along with the gap in the literature, the second research question raised is whether GDP and inflation affect firm performance (both of accounting and economics performance measures) or not. The last question of this paper is whether the relationship between WCM and firm performance is moderated by the macroeconomic factors.
This study uses the OLS regression method with robust standard errors to analyze panel data covering the period 2010-2016. Two-stage least squares with robust standard errors is also used to control the endogeneity problem. The results show that the CCC is negatively related to ROA and REVA. However, when endogeneity problem is controlled for, CCC loses its relationship to REVA. Macroeconomic variables are positively and significantly related to ROA, but only inflation is significantly related to REVA. Moreover, macroeconomic factors do not moderate the relationship between WCM and firm performance.
By considering the strong justification and existing literature regarding the influence of these macroeconomic factors on working capital management and firm performance, the authors believe that this study contributes to the literature in three ways. First, it is a relevant, comprehensive study that determines the moderating role of the GDP and inflation in the relationship between WCM and firm performance (including both accounting-based and economics-based measures of performance), which has not hitherto been shown. Second, there is little evidence on the influence of these macroeconomic factors on economics-based performance measures. This paper provides comparative results to elucidate this issue. Third, there is a considerable evidence on the influence of GDP and inflation on accounting-based performance measure. However, this is the first study which examines the influence of inflation and GDP on accountingbased and economics-based performance measures in Iran. The distinguished condition of economy and institution of Iran leads to a particular set of results which can improve the literature.
The remainder of the paper proceeds as follows. First, the conceptual framework is discussed, and a review of previous relevant papers, empirical and theoretical is performed. Second, the sample is described, the justifications of variables are provided in accordance with the literature, and preliminary tests are conducted. Third, the results of the analysis of the data and the relevant tests are provided. Finally, the conclusions, the implications of the findings, limitations of the study, and a few suggestions for future research are provided.

Working capital management and firm performance
It is generally accepted that WCM has a significant influence on firm performance and profitability (Deloof, 2003;Gill, Biger, & Mathur, 2010;Kabuye, Kato, Akugizibwe, & Bugambiro, 2019;Yazdanfar & Öhman, 2014). Focusing on the speed of the cash cycle through management of receivables and payables, WCM contributes to the generation of profitability and liquidity (Johnson & Soenen, 2003). Moreover, the management of inventory also effectively involves managing liquidity and profitability. Gill et al. (2010) and Abuzayed (2012) conducted studies (with different methods and sample data) in the United States and Jordan, respectively, to investigate the influence of CCC on gross operating income as a proxy for accounting-based measures of performance. They found a positive relationship between CCC and gross operating income (a proxy for profitability). However, many other studies found a negative relationship between WCM and firm performance. For instance, Yazdanfar and Öhman (2014) confirmed a negative relationship between CCC and ROA (as a proxy for accountingbased measure of performance) in Swedish small and medium-sized enterprises (SMEs). Lyngstadaas and Berg (2016) investigated the influence of account receivable, inventories, account payable and cash conversion cycle as proxies for WCM on ROA and return on invested capital (ROIC) in Norwegian SMEs and found negative relationships between firm performance (ROA and ROIC) and CCC (and with its components). Thakur (2015) also examined the relationship between CCC and firm performance as measured by ROA and Tobin's Q (a combination of an accounting-based and a market-based measure of performance) among Bangladeshi firms. Firm growth was determined to be a moderating variable. The results indicated a negative relationship between CCC and ROA, but the model of Tobin's Q was not found to be significant. Additional results showed that firm growth has no significant moderating effects on profitability. It is worth noting that the insignificance of Tobin's Q model shows that WCM did not have a significant influence on the value of Bangladeshi firms. Afrifa and Tingbani (2018) examined the relationship between CCC and firm performance (measured by Tobin's Q and ROA) within UK SMEs and found that CCC is significantly and negatively related to firm performance. However, when the availability of cash flow was accounted for in the models as a moderating variable, the direction of the relationships became significant and positive. Finally, Jakpar et al. (2017) investigated the relationship between CCC and ROA in Malaysian firms and reported that CCC is not significantly related to ROA; thus, WCM had no share in firm performance or level of profitability.
Because most empirical studies argue that effective WCM (which should lead to a reduction in CCC) results in better accounting-based performance, this study hypothesizes that: Hypothesis 1. There is a significant negative association between cash conversion cycle and return on assets among listed Iranian manufacturing firms.
Another aspect of firms influenced by the decisions of executive managers is firm value. By following the traditional view of WCM and accounting-based measures of performance, they cannot provide an answer to the question of how WCM can enhance firm value. To be able to bridge the gap between WCM and firm value, other appropriate measures of performance must be employed. Generally, economics-based measures of performance, such as EVA, are significantly related to firm value and shareholder wealth maximization (Stewart, 1994, p. 75). In this vein, previous work has strongly argued that WCM should be used to improve firm EVA (Gitman, Juchau, & Flanagan, 2010). As a result, WCM (as an indicator of short-term decision-making) may be related to EVA and other relevant measures, which provide essential information on firm value and other relevant long-run purposes.
The EVA calculation formula is based on operating income (after taxes), cost of capital, and capital components invested. To be able to deduce the influence of WCM on EVA and other similar measures as refined economic value added (REVA), it is necessary to investigate whether WCM can influence the formulas of these measures significantly. It can be argued that when a firm holds a considerable amount of working capital, a significant portion of that company's resources is tied up in two of the three components of CCC (account receivables and inventories). This could result in a lack of liquidity that would interact with the capital structure and the relevant costs of capital and debt. Stephens and Bartunek (1997) argued that reducing WCM, which is entailed by a reduction in accounts receivable and inventory, contributes to increases in EVA and shareholder wealth maximization. Effectively applied WCM, which usually leads to increases in free flow of cash, results in increases in operating income and subsequently, the EVA. Here, it is worth noting that following an aggressive strategy that leads to an extensive use of short-term credit sales, high turnover of inventory, and stretching out bill payments, can lead to increases in operating income and subsequently EVA (the opposite description would apply to a conservative strategy). This means that WCM and the application of related strategies would have a significant influence on the level of EVA. Stephens and Bartunek (1997) also concluded that CCC should be combined with EVA so that management would have the incentive to do the right thing for the firm and for its shareholders. Moreover, when considering how to maximize shareholder value, the influence of ineffective decisions regarding working capital and their negative consequences should also be considered (Cooper, Ramachandran, & Schoorman, 1998).
On this theoretical foundation and following previous empirical results, this study hypothesizes the following: Hypothesis 2. There is a significant negative association between cash conversion cycle and revised economic value added among Iranian listed manufacturing firms.

Macroeconomic factors and firm performance
Many empirical studies, with different proxies and methods, have investigated the influence of such factors on firm performance (using accounting-based and market measures). To a great extent, they report that macroeconomic conditions have a significant influence on firm performance (Abaidoo & Kwenin, 2013;Fama, 1981;Issah & Antwi, 2017). Inflation is one of the most pervasively used macroeconomic indicators in the literature. This measure shows a persistent increase in the prices of goods and services and a persistent decline in purchasing power. Generally, inflation increases a firm's expenditures. On the other hand, it also increases the price of goods and may negatively influence demand. If the outcome of these effects is positive on the whole (where increase in income growth is greater than increase in cost growth), the profitability and performance of a firm improve. Empirical studies state that inflation has a significant influence on production costs, meaning that increases in the rate of inflation reduce profitability. Lee (2003) deduced that the rate of inflation is closely related to firm performance (measured by ROA); however, the direction and intensity of this relationship depends upon the resulting supply, fiscal, and monetary disturbances. From another point of view, in inflationary periods, lenders increase their interest rates to cover inflation losses to profit in exchange for the risk of lending money. Lenders' rate increases elevate the borrowing costs of firms, decreases firm profitability, and then increases the cost of capital (Kaminsky, Reinhart, & Vegh, 2003). However, unlike Kaminsky's (2003) results, which indicated that inflation leads to increases in the cost of capital and subsequent reduction in the EVA, Ramadan (2016) found that inflation is positively and significantly related to EVA. Thus, there is mixed evidence on the influence of inflation on EVA, as a proxy for economics-based performance measure.
As there is no strong evidence of concerning the relative acceleration of income growth and expenditures, and there is mixed empirical evidence on the influence of inflation on accountingbased and economics-based measures of performance, no direction of association can be presumed. The following hypotheses are posited: Hypothesis 3. There is a significant association between the rate of inflation and return on assets among listed Iranian manufacturing firms.
Hypothesis4. There is a significant association between rate of inflation and revised economic value added among listed Iranian manufacturing firms.
GDP is the market value of all goods and services provided in a country within a period of one year. It is widely recognized as a comprehensive measure of economic performance (Bregar et al., 2008). Much previous work has argued that GDP is significantly and positively related to firm performance (Baños-Caballero, García-Teruel, & Martínez-Solano, 2012;Deloof, 2003;García-Teruel and Martinez-Solano, 2007;Lyngstadaas & Berg, 2016;Pais & Gama, 2015;Ramadan, 2016). The argument is that in a favorable economic cycle and with growth in the economy, conditions favor firms that are increasing their sales and pursuing appropriate policies. In turn, in favorable economic conditions, in which the income per capita of the population is higher, the variety of goods consumed increases (Jackson, 1984), which leads to increases in profit margins and in firm value. Additionally, so long as good economic conditions prevail, firms can take advantage of economies of scale. In this way, they can purchase raw materials for a more reasonable price, which leads to reductions in the cost of goods and reductions in relevant expenditures. Drawing on the majority of previous empirical findings, which favor the belief in the positive influence of economic performance and activity on firm performance, the following hypotheses are posited: Hypothesis 5. There is a significant positive association between gross domestic product and return on assets among listed Iranian manufacturing firms.
Hypothesis 6. There is a significant positive association between gross domestic product and revised economic value added among listed Iranian manufacturing firms.

Moderating role of macroeconomic factors
Factors outside a firm's control, such as macroeconomic factors, must play an important role in short-term decisions and policies of firms, including WCM policies. Ali and Khan (2011) argued that poor economic conditions (such as recession) affect firm policies, including WCM.
During inflationary periods, the state of working capital fluctuates greatly, which requires a response with relevant policies to strike a balance. Mathuva (2010) showed that there is a significant relationship between inflation and CCC. In inflationary periods, the need for working capital increases. Moreover, as the rate of inflation increases, sales plunge (Deloof, 2003), which leads to decreases in firm revenue and subsequently, profit margins. Thus, firms must extend the credit period of their sales to compensate the reduction of profit margins, which results in a longer CCC (Enqvist et al., 2014). In addition, inflation can negatively influence the purchasing power of customers, which subsequently affects firm credit policies and receivable collection periods (Golverdi and Mehrabanpour, 2017). In such periods, it is hard for firms to maintain their level of profitability to finance working capital (Sundar, 1980). Moreover, during such periods, firms deal with longer CCCs, as their inventories are tied up and their receivables do not materialize. In support of previous studies, Eldomiaty, Anwar, and Ayman (2018) indicated that the inflation leads to increases in the cost of goods sold; therefore, firms react by staking inventories and extending receivables; the result of this is to increase the length of CCC. Further, Golvardi and Mehrabanpour (2017) stated that inflation leads to an increase in the production cost, which plays a positive role in the CCC. In an inflationary period, firms may face with liquidity problems which disable firm to meet the short-term obligations on a timely basis, leading to a longer CCC (Eldomiaty et al., 2018;Shi et al., 2016). Few studies have found that the rate of inflation has no substantial influence on working capital. Yenice (2015) investigated the influence of macroeconomic factors on CCC and the level of working capital, using artificial neural network modeling. His finding illustrated that the rate of inflation influences CCC and the level of working capital, although such influences are not very important. Moreover, Doruk and Ergün (2019) found that CCC is positively related to CCC but the influence is not significant. This study hypothesizes that while CCC has a direct negative effect on ROA and REVA, inflation may have a moderating effect on these relationships. Following the dominant empirical evidence, it can be expected that when the rate of inflation is higher, firms experience longer CCC and better performance. Here, these results in the following hypotheses being posited: Hypothesis 7. Inflation weakens the negative effect of cash conversion cycle on return on assets among listed Iranian manufacturing firms.
Hypothesis 8. Inflation weakens the negative effect of cash conversion cycle on revised economic value added among listed Iranian manufacturing firms.
Generally, previous studies have indicated that economic circumstances have a significant influence on the level of WCM (Blinder & Maccini, 1991). Some previous empirical work has investigated GDP's relationship with accounts receivables and related credit policies (Shi et al., 2016). Shi et al. (2016) found that a significant and negative influence here, which means that when macroeconomic conditions are unfavorable, to compensate for reduced cash sales (and generally reduced cash flow), firms increase the credit they grant to encourage customers to increase demand. Further, customers cannot pay off their debt on a timely basis during an economy downturn, leading to the prolongation of the receivable collection period (Golverdi and Mehrabanpour, 2017). Moreover, economic conditions can also have a significant influence on the level of inventory. The evidence regarding the influence of economic condition (with GDP as a proxy) on the level of inventory is mixed. Blinder and Maccini (1991) found that GDP has a significant influence on the level of inventories; thus, in recession conditions, a considerable reduction in inventory results. However, Chiou et al. (2006) stated that during recessions, firms might increase their inventory levels to gain additional benefits. In the downturn economic condition, firms may fail to pay off the short-term obligations on a timely basis, which results in increasing the debt payment period (Golverdi and Mehrabanpour, 2017). Mansoori and Muhammad (2012) investigated the relationship between GDP and CCC (CCC). They found that there exists a significant and negative relationship between GDP and CCC in Singapore. This implies that when firms are functioning amid general economic prosperity and expansion, they pursue aggressive strategies. Wasiuzzaman and Arumugam (2013) also investigated the relationship between CCC and GDP. They argued that during a recession, firms will attempt to shorten their CCC by squeezing as much cash as possible. Baños-Caballero, García-Teruel, and Martínez-Solano (2013), Zariyawati, Taufiq, Annuar, and Sazali (2010), Moussa (2019) and Doruk and Ergün (2019) also found a positive relationship between economic conditions and CCC. So, during an expanding economy, firms increase their investment in working capital. However, Eldomiaty et al. (2018) showed that when the economy is not generally growing, firms attempt to remain at their existing levels of working capital. In contrast with the strand of empirical studies that have found a significant relationship between GDP and WCM, few studies found no significant relationship between WCM and GDP. Yenice (2015) reported that while GDP is influential on CCC and the level of working capital, such influences are not very important. Nyeadi, Sare, and Aawaar (2018) stated that the GDP growth doesn't have significant influence on working capital of manufacturing listed firms on Ghana stock exchange market. Moreover, Baños-Caballero, García-Teruel, and Martínez-Solano (2010) and Abbadi and Abbadi (2013) argued that the state of the economy doesn't have significant influences on CCC.
This study hypothesizes that while CCC has a direct and negative effect on ROA and REVA, GDP may have a moderating effect on them. To sum up, when economic conditions are prosperous and favorable, regarding the majority of available evidences, firms experience the better performance; however, there exist mixed evidence on the influence of GDP on WCM and its proxies (such as CCC), and there is no way to prove directionality. Therefore, the following hypotheses are posited: Hypothesis 9. Gross domestic product moderates the negative effects of cash conversion cycle on return on assets among listed Iranian manufacturing firms.
Hypothesis 10. Gross domestic product moderates the negative effects of cash conversion cycle on revised economic value added among listed Iranian manufacturing firms.

Description of sample and variables' justification
The population of the study is all manufacturing firms traded on the Tehran Stock Exchange. To increase the reliability of the results, firm data were directly extracted from the audited financial statements that are available on the CODAL database, which have been used extensively by previous researchers (e.g., Alipour, Ghanbari, Jamshidinavid, & Taherabadi, 2019;Salehi, Lari Dashtbayaz, & Khorashadizadeh, 2018). Further, all macroeconomic data were obtained from the World Bank database. To increase the reliability of the results, the following filters were applied and only those firms passed the filters were considered for data analysis: (1) Firms which had operating activity during the relevant seven-year period under review; (2) Firms were active in the stock exchange during the period under review; (3) Enough information was available for the firms and their financial statements were audited; (4) Firms were both for-profit and not operating as investment companies, financial intermediaries and banks, holding and leasing companies since the operation of these industries and sectors were different from other member companies (manufacturing firms).
The final dataset consists of 111 firms and 777 observations (2010 to 2016). It is also noteworthy that analyzing a longer series of accounting data (e.g. more than five years) may help alleviate the concern about the unreliability of accounting data (Alipour et al., 2019).
The industries were selected based on the criteria and classification used by Tehran stock exchange. As shown in Table 1, the observations were distributed among 19 industries. Regarding the industry distribution of sample, automotive and the manufacturer of automotive parts has the highest number of firms in the dataset (16 firms) and manufacturer of wood products, extractor of coal, producer of paper and agricultural, animal husbandry and related products have the lowest share in the dataset and one firm operates in each of these industries. It is worth noting that the sample data are manufacturing firms. Table 2 gives the descriptive statistics of the variables in the sample. The average ROA of companies in that dataset is 13%, which is higher than the average ROA of the UK firms (around 5%) evaluated by Afrifa and Tingbani (2018). The average REVA of the firms is −350,852, which indicates that listed Iranian manufacturing firms are not successful in creating value. The mean CCC for Iranian firms is 205 days, much greater than that of the other studies, such as the work of Lyngstadaas and Berg (2016) (where mean CCC is found to be around 73 days) or Deloof (2003) (where mean CCC is around 44 days). This suggests that a larger proportion of manufacturing firms traded on the Tehran stock exchange take longer to collect receivables, that spend more time holding inventories before the sales, and where less time is required to pay off short-term obligations. Alternatively, this could indicate businesses' dependence on external financing (Maness, 1994). The average cash flow in Iranian companies is 17%, which is higher than the cash flow in UK firms (10%). Further, the average size of an Iranian company is 6 (2,882,766 million Rial). Further, as about 66% of total assets in Iranian companies are debt, firms are exposed to considerable financial costs, which influences their profitability and their cost of capital (and subsequently REVA values) negatively. Moreover, the average rate of inflation from 2010 to 2016 (19.5%) indicates that, during the time period of the study, inflation may have had an influence on CCC of the given firms, with consequences for their overall performance. The current assets of Iranian firms allocated 65% of the total assets. Thus, a higher safety margin is available for Iranian firms although there is less potential for earning return for Iranian firms since the returns generated from current assets are generally lower than those from fixed assets. Further, the mean of CLR is 87%, which imposes a considerable threat to the financial performance and liquidity of the firms in the short term. The mean VNOI for Iranian firms is 0.271 is less than that of the other papers. The results are consistent with those in the study of Abuzayed (2012), where the mean VNOI for Jordanian listed firms was 0.336, indicating less volatility of financial performance among Iranian firms.
Research variables are defined as follows: CCC is a common measure of WCM, defined as the "time span between the expenditure for the purchases of raw materials and the collection of receivables of sold goods" (Gill et al., 2010). It is a dynamic measure (Gitman, 1974), and it uses data from both balance sheets and income statements (Lyngstadaas & Berg, 2016). It has three main dimensions: inventory acquisition, receivables collection, and short-term debt payment. Many previous studies have employed CCC as a proxy for WCM (Deloof, 2003;Gill et al., 2010;Lyngstadaas & Berg, 2016;Yazdanfar & Öhman, 2014). CCC is calculated as follows: Cash conversion cycle ¼ Number of days of accounts receivable þ Number of days of inventory À Number of days of account payable Profitability can be measured in multiple ways. Researchers such as Deloof (2003), Gill et al. (2010), and Mathuva (2010) have used net operating income and gross operating income as proxies for profitability. However, such measures are limited to statements of income. Other measures, such as ROA, ROE, and ROIC, can be employed, as they embrace a wider scope of financial reality; further, as they include both statements of financial position and income statements and indicate the profitability of a firm in relation to such other items as total assets or total owner of equity, they succeed in demonstrating profitability in a more accurate way. More recent papers have employed these indices to proxy for profitability and firm accounting-based performance (Lyngstadaas & Berg, 2016;Pais & Gama, 2015;Yazdanfar and Ohman, 2014). Because ROA accounts for all resources (including accounts receivable and inventory, which together form about 38% of total assets of firms and are considered two significant proxies of WCM) that can be reflected in financial statements, in this study ROA is chosen as a proxy for accounting-based performance measures. The relevant calculation follows:

ROA ¼ Net Income Total Assets
Another category of performance measure that has not received sufficient attention is economicsbased performance; its most pervasive proxy is EVA. This is a different measure from ones used previously because those usually depend on accounting information. These kinds of indices fall short because such accounting performance measures as earnings fail to measure changes in the economic value of the firm (Sabol & Sverer, 2017). EVA is a commonly used performance measure, and it has been judged to be one of the best developed ones for judging whether an objective is ROA, return on assets; REVA, refined economic-value added; CCC, cash conversion cycle; GDP, gross domestic product (nominal); CAR, current assets ratio; CLR, current liabilities ratio; VNOI, variability of net operating income; FFA, fixed financial assets to total assets. achieved or not (Alsoboa, 2017). Although EVA is a good indicator of firm value, in this study REVA has been selected to measure economics-based performance. Bacidore, Boquist, Milbourn, and Thakor (1997) introduced this proxy for the first time. It provides an analytic framework to evaluate the operational performance of a firm and the value created for shareholders. To a large extent, the calculation of REVA is similar to that of EVA, with the difference that the costs of capital are calculated relative to the market value of corporate assets in REVA (Baseri, Atefat, & Baseri, 2013). Two main advantages accruing to the use of REVA can be found in the literature. First, positive values for REVA demonstrate that the return from operating income that flows to investors during the given period exceeds the potential opportunity cost of their capital. In EVA, an investor could receive an operating income-based return that is less than the opportunity cost of the use of their capital, even when EVA is positive. Thus, REVA better indicates investors' return adequacy and the risks incurred. Second, the market value of the firm, which is considered in the calculation of REVA, includes the values of both the physical assets and the executive managers' strategy and policies, but the book value of the firm, a component of EVA, only gives the values for the physical assets that are in place (Bacidore et al., 1997). As WCM must compromise among policies governing the effective acquisition and consumption of inventories, collecting receivables and paying short-term debts to decrease the risk of liquidity and the other relevant risks, it is expected that REVA can be a better proxy rather than EVA for economics-based performance. It is also worth noting that, since the idea and mechanical calculation of REVA are highly similar to EVA, the empirical evidence and conceptual framework for EVA can be generalized to REVA. This measure is calculated as follows: REVA ¼ Operating income after taxes À Weighted average cost of capital Â Market value of total assets 1 À current liabilities À Á Many macroeconomic factors have their own particular theoretical framework and meaning. This means that the selection of the relevant macroeconomic factors is an essential step that requires judgment (Humpe & Macmillan, 2009). To select the relevant macroeconomic factors to best suit the research design, the findings of the previous empirical findings and the relevant literature were analyzed.
The first variable selected is the rate of inflation. Within macroeconomic theory, lower rates of inflation indicate economic stability. Most governments in both developed and developing countries work to control it, and to stabilize prices, they may implement a variety of monetary and fiscal policies. Inflation demonstrates the power of the national currency, and when inflation is greater, more nominal money must be paid to acquire the same amount of goods or services as before the change. Based on the existing literature, inflation has significant influences on both financial performance and WCM. Based on the results of Lee (2003), Kaminsky et al. (2003), and Ramadan (2016), the inflation can influence firm accounting-based performance and cost of capital, which affects economics-based performance measures subsequently. In the present study, REVA used as a proxy for economics-based performance concept is affected by the cost of capital. Further, based on the literature, WCM and its components are influenced by inflation. In this vein, Enqvist et al. (2014) and Mathuva (2010) argued that inflation is significantly related to WCM. Although there is strong literature on the influence of inflation on both firm performance and WCM, little evidence is available for the moderating role of the inflation in the relationship between WCM and firm performance. Thus, it was selected as a moderating variable.
The second selected variable is GDP (nominal). This is widely considered to be the most important macroeconomic factor because it gives an economy-wide picture of the state of a country and its welfare. It is widely taken to be a comprehensive measure of economic performance (Bregar et al., 2008), and furthermore, it is a single summary number that can indicate all economic activity (Konchitchki & Patatoukas, 2014). Based on the results of the previous studies (e.g., Baños-Caballero et al., 2012;Deloof, 2003;García-Teruel and Martinez-Solano, 2007;Lyngstadaas & Berg, 2016;Pais & Gama, 2015;Ramadan, 2016), GDP is significantly related to firm performance. In addition, some other studies (e.g., Blinder & Maccini, 1991;Chiou et al., 2006;Shi et al., 2016Shi et al., , 2016 confirmed that the economic performance (GDP) plays a significant role on WCM and its components.
Regarding previous studies, the present study considered some control variables such as firm size, leverage, cash flow, current asset ratio (CAR), current liabilities ratio (CLR), fixed financial assets to total assets (FFA), firm age and variability of operating net income (VNOI) in order to improve the results and avoid the potential problems of endogeneity and omitted correlated variable (OCV) bias. Size is defined as a natural logarithm of total assets (Lyngstadaas & Berg, 2016). Afrifa and Tingbani (2018) showed that cash flow is positively correlated with firm performance, which could interfere with the relationship between firm performance and WCM. It is defined as the ratio of operating cash flow to total sales. Leverage has received a lot of attention in the literature. The leverage is defined as the proportion of total assets assigned to the total debt (Jakpar et al., 2017). Current assets ratio (CAR) is defined as the proportion of total assets which is devoted to current assets (Eljelly, 2004;Lyngstadaas & Berg, 2016;Pais & Gama, 2015). Current liabilities ratio (CLR) is measured as the proportion of total liabilities which is assigned to current liabilities (Lyngstadaas & Berg, 2016;Pais & Gama, 2015). Another control variable is related to the age of firm, which is calculated as the natural logarithm of number of years since establishing the firm (e.g., Baños-Caballero et al., 2010;Garcia-Teruel and Martinez-Solano, 2007;Mathuva, 2010). Another control variable is fixed financial assets to total assets (FFA), which is measured as the proportion of total assets assigned to fixed financial assets (Bhatia & Srivastava, 2016;Deloof, 2003). Variability of operating net income (VNOI) is considered as the final control variable, which is measured as the standard deviation of net operating income of each firm during seven years divided by the total assets minus financial assets (Abuzayed, 2012;Deloof, 2003). Table 3 gives the Pearson correlation matrix for the variables. CCC, an index for WCM, is not significantly (for the three levels of significance investigated) related to the dependent variables (ROA and REVA). This result is consistent with those of Sharma and Kumar (2011), who found no significant correlation between CCC and ROA. Therefore, at first glance, CCC does not appear to be significantly related to firm performance. Moreover, all macroeconomic variables are significantly correlated with ROA, so there is evidence for the significant and direct relationship between macroeconomic variables and accounting-based measures of performance. This result is consistent with Lyngstadaas and Berg (2016), who found a positive and significant correlation between GDP and ROA. However, among macroeconomic variables, only inflation is found to be significantly related to REVA. As a result, the macroeconomic variables appear to bear a closer relationship to ROA than REVA. Based on the findings, macroeconomic variables are not significantly correlated with WCM. In addition, the paired correlations among control and independent variables are all negligible except the correlation between the leverage and VNOI (0.6167). To obtain a reliable result for the multicollinearity problem among the variables, variance inflation factor analysis (VIF) was employed. The results indicated that all of the values are below 10 and the highest VIF value is related to CAR (VIF = 5.52). Therefore, there is no problem for multicollinearity among explanatory variables (untabulated results).

Results
The results shown in Table 3 provide initial insights on the influence of WCM on firm performance. To obtain robust results for the relationships and draw conclusion on the hypotheses, the following additional analyses have been applied.

Results of the main analysis
The influence of WCM on firm performance was tested using pooled ordinary least squares (OLS). Estimates were obtained from Equations 1 and 2:  *, **and ***, Significant at 90%, 95% and 99%, respectively. REVA, refined economic-value added; CCC, cash conversion cycle; GDP, gross domestic product (nominal); CAR, current assets ratio; CLR, current liabilities ratio; VNOI, variability of net operating income; FFA, fixed financial assets to total assets.
where ROA measures accounting-based performance and REVA measures economics-based performance 2 . CCC is selected as an independent variable to capture WCM. Moreover, dummy variables for industry and year are added to the models. The variables for size, cash flow, leverage, current assets ratio (CAR), current liabilities ratio (CLR), firm age, firm fixed assets to total assets (FFA), and variability of net operating income (VNOIT) are included in the models as control variables. Further, error term represents the variation of dependent variables that are not described by the exogenous variables in the models. Finally, to overcome problems of serial autocorrelation and heteroskedasticity, a robust standard error is employed in the pooled OLS regression analysis.
The influence of the macroeconomic factors' inflation rate and GDP on firm performance was tested using pooled OLS. To determine the direct influence of macroeconomic factors on firm performance, the macroeconomic factors' inflation and GDP are introduced separately, in different regression models. It is worth noting here that a dummy variable for years is dropped from the models because using it would cause a collinearity problem with the relevant macroeconomic variables. Estimates are obtained from the following equations: To determine the moderating role (interaction effects) of macroeconomic variables and to provide reliable results, the macroeconomic factors' inflation and GDP and their interaction components are introduced separately, in different regression models. As in the previous section, the dummy variable for years has been dropped from the models because it would cause a collinearity problem with the relevant macroeconomic variables. The estimates for the analysis are obtained from the following equation: The results of the first model show that CCC is negatively and significantly related to ROA. This empirical result supports the first hypothesis; however, the correlation matrix indicates no support. This expresses the fact that on average, when firms reduce the trade credit they grant for sales, less of their inventory is tied up, and bill payments are stretched out, and they are able to achieve higher profitability. This result confirms the work of previous authors (Lyngstadaas & Berg, 2016;Thakur, 2015;Yazdanfar & Öhman, 2014). Furthermore, it does not support Gill et al. (2010) or Abuzayed (2012). Moreover, cash flow and size have a positive, significant relationship with ROA, which confirms the results of the correlation matrix. For size, this may be because when the firms are larger, they can attract more customers and take greater advantage of economies of scale. The positive influence of cash flow on ROA could explain the consideration that when cash sales are in a greater proportion to total sales, the amount of bad debt is lower; thus, higher profitability can be achieved. The significant and negative relationship between leverage and ROA confirms the results of the correlation matrix. This relationship can be attributed to the fact that when a firm is highly leveraged, it incurs significant borrowing costs, which then leads to decreases in profitability. Based on the results, a positive relationship between CAR and ROA confirmed the results of correlation matrix, which supports the idea that more conservative policies and keeping more amount of current assets favor financial performance. Further, CLR is not significantly related to ROA, which is inconsistent with the results of correlation matrix. Furthermore, a negative relationship between FFA and ROA confirmed the results of correlation matrix, indicating that the negative aspects of investing in other firms exceed the turning points of the investments and have negative effects on the financial performance of the firms. In addition, the result of firm age confirmed the relevant result of correlation matrix and indicated that younger firms are able to have better financial performance. Finally, the results explain that the firms with better financial performance experience much more volatility of operating income, which are not in line with the results of correlation matrix.
Same as the first model, in the second model, the result shows that CCC is negatively related to REVA, which supports the second hypothesis. However, it is not consistent with the results of the correlation matrix. Because the effective use of WCM (which is usually followed by a reduction in CCC) generally leads to increases in liquidity and a subsequent reduction in the cost of capital, it can also lead to increases in REVA (as a proxy for firm value). Stephens and Bartunek (1997) argued that reductions in WCM (i.e., in effective WCM) contribute to EVA and maximization of shareholder wealth, which to a great extent is confirmed by the results of this segment. Further, no control variable has significant influence on REVA, except the leverage and size, which are negatively associated with REVA. The finding of leverage in regression analysis supported that of correlation matrix. It is worth considering that inverse relationships might stem from the endogeneity problem (Deloof, 2003;García-Teruel and Martínez-Solano, 2007). Therefore, profitability and economics-based performance can also affect the WCM, which makes it necessary to consider and control the endogeneity problem.
Based on the result of the third model, the influence of inflation on ROA is positive and significant, which supports the third hypothesis. The results also confirmed by the correlation matrix. Thus, in inflationary periods, expenditure increases. On the other hand, the price of final goods also increases, and inflation generally has a negative influence on market demand. Nevertheless, it is evident that in inflationary periods, income growth accelerates is more than expenditures do. To some extent, this result does not accord with previous work (Kaminsky et al., 2003), which can be attributed to supply, fiscal, or monetary disturbances (Lee, 2003). Unlike the third model, Inflation has a negative and significant influence on REVA in the fourth model, which supports the fourth hypothesis. This result is confirmed by the correlation matrix. It is evident that inflation negatively influences economics-based performance and firm value. The negative relationship between inflation and REVA may result from Iran's high level of inflation, which causes increase in cost of capital, which then leads to decrease in REVA. This result is to a great extent consistent with Kaminsky et al. (2003), who found a negative and significant relationship between inflation and EVA.
Based on the fifth model, it is found that the effect of GDP on ROA is positive and significant, which supports the fifth hypothesis. This result is indicated by the correlation matrix. The positive relationship that GDP has with accounting-based performance measures is quite concordant with the results given in previous papers (Baños-Caballero et al., 2012;Deloof, 2003;Juan García-Teruel & Martinez-Solano, 2007). It can be concluded that firms can take advantage of favorable economic conditions and improve their profitability. Moreover, in conditions of prosperity, customers could enjoy higher incomes per capita, which results in a significant and positive influence on demand (Jackson, 1984) and thus on firm profitability. However, unlike the previous model, GDP does not show a significant influence on REVA (based on the sixth model), which does not support the sixth hypothesis. The finding regarding the relationship between GDP and REVA is subject to some doubt. The several conflicting effects that influence the relationship between GDP and REVA (as a proxy of economics-based performance and firm value) could explain the insignificance of this relationship.
Because of the insignificance of interaction components in the seventh, eighth, ninth and tenth models, inflation and GDP do not have moderating effects or any indirect influence on the relationship that CCC has with ROA and REVA, which shows no support for the seventh, eighth, ninth, and tenth hypotheses. The insignificance of the interaction components of inflation and GDP is accounted for by the idea that the Iran's inflation rate and economic performance have no significant influence on the Iranian manufacturing WCM policies, which was indicated, to a certain extent, by previous studies, such as Yenice (2015), Baños-Caballero et al. (2010), Abbadi and Abbadi (2013) and Nyeadi et al. (2018). This claim also has been empirically examined (untabulated results) 3 . In contrast with the strand of previous empirical studies and theoretical foundations that confirmed the significant relationship between inflation and GDP with WCM, the empirical result of this study shows that the WCM and the relevant policies of listed Iranian manufacturing firms are not influenced by economic performance (GDP) and inflation, or such influences are not strong enough to moderate the influence of WCM on firm performance. The results probably support the idea that management of working capital within Iranian manufacturing firms is more influenced by the firms-level (internal) factors. In support of this claim, Anvari Rostami et al. (2014) argued that there exist significant association between several firm-level factors (such as the leverage, capital investments and operating cash flow) and WCM of listed Iranian manufacturing firms. The impact of the factors on WCM also has been widely documented and confirmed in previous studies (e.g., firm size, sales growth, proportion of intangible assets (Mongrut, Fuenzalida O'Shee, Cubillas Zavaleta, & Cubillas Zavaleta, 2014); firm size, growth opportunities and leverage (Zariyawati et al., 2010); firm size, future sales growth; board composition, executive compensation and CEO ownership (Kieschnick, Laplante, & Moussawi, 2006); firm size, firm age, profitability, operation cycles, sales growth and leverage (Nyeadi et al., 2018) and firm age, firm performance, firm value, operating cash flow and growth opportunities (Moussa, 2019).

Robustness and endogeneity
Previous work has found that there may be an endogeneity problem in the relationship between WCM and firm performance (Deloof, 2003;Juan García-Teruel & Martinez-Solano, 2007;Pais & Gama, 2015). To check for possible endogeneity, two-stage least squares with robust standard errors is used. Following previous studies, the most common instrumental variables are taken to be the first lag of WCM indices, such as AR, INV, AP, and CCC (Juan García-Teruel & Martinez-Solano, 2007;Lyngstadaas & Berg, 2016;Pais & Gama, 2015). Therefore, the first lag of AR, INV, AP, and CCC was used as instrumental variables in the models.
The finding of the first model shows that all results are similar to those in Table 4. Therefore, it appears that no endogeneity problem exists for the selection of an accounting-based performance measure, and the first hypothesis is strongly supported. Considering the problem of endogeneity in the second model and controlling for it, CCC does not significantly affect the economics-based performance measure (REVA); therefore, while the endogeneity problem is controlled, the second hypothesis is nevertheless not supported. The existing theoretical framework and the results given in Table 4 indicate that CCC evidently affecting economics-based performance negatively. However, when the possible influence of economics-based performance on CCC is controlled, the results fail to be significant. Thus, when economics-based performance is weaker on average, firms tend to provide more credit and extend terms of payment to customers. Likewise, when firms encounter declines in sales and weaker performance, their inventory levels rise. Further, firms that have weaker performance may accelerate payments to avoid deferment penalties. As a result, weaker economic performance, which may be due to higher costs of capital, can lead to longer CCC and a liquidity problem.

Conclusion and further study
WCM is an important tool for daily functioning in corporations; it helps firms balance their current assets and liabilities. The influence of WCM is investigated here in relation to the performance of 111 listed Iranian manufacturing firms in 2010-2016. OLS regression is used with robust standard  errors to assess the results. This study is an exciting first step in understanding the moderating role of macroeconomic factors in the relationship between WCM and firm performance. The significant and negative relation between CCC and ROA shows WCM's link to a typical example of the riskreturn nature of financial decision-making (Yazdanfar & Öhman, 2014); thus, the adoption of an aggressive strategy contributes to the improvement of accounting-based performance. To achieve this, the credit granted to customers should be limited, inventories should be minimal, only to the extent that needs are met, and bill payments should be stretched. Further, in the primary analysis, CCC is negatively and significantly related to REVA; however, when the endogeneity problem is controlled, this relationship lost its significance. As a result, WCM policies, which are related to short time periods, do not have significant influence on firm value or long-term performance.
The direct role of macroeconomic factors is also analyzed, and it is found that the effects of inflation and GDP on ROA are positive and significant. The implication can be drawn here that because macroeconomic conditions have a significant influence on accounting-based performance, executives, besides internal and controllable factors, must consider macroeconomic conditions as they draft their decisions, policies, and actions. For example, when firms are operating in high-performing economic conditions (high levels of GDP), they should employ aggressive strategies to attract more customers, improve turnover, and take advantage of general prosperity, to generate more sales and thus, greater profitability. Further, inflation threatens firms as they increase expenditures and reduce the purchasing power of customers. However, executives must employ techniques, such as cost management, to keep expenditures at a moderate level and employ motivational policies (such as efficient rebates) to maintain sales levels. Of the two macroeconomic variables reviewed, only inflation was significantly associated with REVA. Thus, financial executives are recommended to pay close attention to measures of inflation, which has a significant influence on both short-term performance and the ability of firms to generate value. Additionally, when macroeconomic factors (as moderating components) are introduced to the models, they do not moderate the influence of WCM on firm performance. As mentioned in Section 4, it is expected that the WCM of Iranian firms is more influenced by firms-level factors, such as board composition, executive compensation, CEO ownership, firm size, operating cash flow, leverage, and other relevant factors, which conclusion, to a great extent, is supported by previous work (e.g., Rostami et al., 2014;Kieschnick et al., 2006;Zariyawati et al., 2010). Because this study takes place in an environment where the rate of inflation is high, practitioners and researchers should be cautious in generalizing these results. Moreover, we did not perform any tests for endogeneity of the relationship between macroeconomic and firm performance as a robust test, as no theoretical results have indicated the possibility that endogeneity is a problem in this relationship, and it is unclear what instrumental variables should be used to test it. It is recommended, future researchers evaluate the existence of endogeneity problem in this relationship.
The results of this study have important theoretical and practical implications. Theoretically, this study, which examines the association between WCM and economics-based performance measure (REVA) and the moderating role of macroeconomic variables (inflation and GDP) in the WCMperformance relationship, enhancing the WCM literature and providing an opportunity for future researchers. Prospective researchers are able to research about the influence of WCM on the other economics-based performance. Also, by examining the relationship between macroeconomic factors (inflation and GDP) and economics-based performance measure (REVA), we signal to future researchers that macroeconomic factors not only affect accounting indicators but also can affect long-term performance indicators.
Also, the findings of this study have important practical (managerial) implications; firstly, managers should pay close attention to changes in economic conditions, because the results of this study show that the economy condition (GDP) has significant and positive influences on both short-term and long-term firm performance (firm value). In addition, the inflation with REVA has a negative and significant relationship; the authors argue that much of this impact may be due to the impact of inflation on capital structure and cost of capital, which affects the long-term performance. In this regard, Tehrani and Najafzadeh Khoi (2017) in a study in an Iranian environment stated that high inflation can lead to an increase in the cost of capital. Therefore, adjustments to capital structure with respect to inflation may seem necessary. Finally, it is specifically suggested to Iranian managers that by reducing their cash conversion cycle, they can increase their short-term performance.
It is highly recommended that future researchers evaluate the moderating role of GDP and inflation rate in other countries that feature different overall conditions (such as countries with low rates of inflation) and compare those results with the evidence given in this paper. This will contribute to an understanding of the role that macroeconomic variables can play for WCM and firm performance. Furthermore, researchers can go further and evaluate the moderating role of other macroeconomic factors on this relationship and expand the literature of macroeconomic factors regarding WCM.
are not significantly associated with CCC (untabulated results, Page 17).


extfieldsofstudy: Medicine Business

text:
Exploiting the “video game craze”: A case study of the tobacco industry’s use of video games as a marketing tool

Background Video games have grown in popularity since the 1970s, and tobacco imagery is present in a substantial subset of games, including those oriented to youth. Much like exposure to tobacco content in films, exposure to tobacco content in video games may influence smoking uptake and use; however, the tobacco industry’s role in facilitating or promoting the use of tobacco imagery in video games is unclear. We explored the industry’s interest in and use of video games to market their products to youth and young adults. Methods We retrieved and analyzed archival tobacco industry documents. We supplemented information from the documents with current and archived versions of several brand and corporate websites and one website containing user-supplied information on video games. Results Tobacco companies recognized the youth appeal and marketing potential of video games as early as 1980. Initial marketing ideas included incorporating video game themes into product packaging and design. More fully realized plans focused on incorporating video games into product promotions in bars, as a high visibility way to attract younger patrons and increase long-term marketing opportunities by generating names for tobacco company direct-marketing databases. Tobacco companies also incorporated video games into in-home product promotions, primarily as components of brand websites, in order to enhance brand image and generate repeat website traffic. A similar desire to attract and keep visitors led to discussions about the inclusion of video games on corporate youth smoking prevention websites, although only one company, Lorillard, followed through. Conclusions Video game players are an attractive target market for tobacco companies. Video games, as used by these companies, facilitate consumer engagement with particular tobacco brands or particular corporate messages. Eliminating the use of video games as a promotional vehicle may require limiting tobacco marketing in both physical and online environments.

Introduction
Since the 1970s, video games have grown in popularity, such that the video game industry now generates three times the revenue of the film industry [1]. Although regarded as a youthful pastime, in the US, video game play is also common among adults (ages 30-49), with boys and young men predominating in both the younger and older player age groups [2,3]. Since it first appeared in 1978 [4], advertising in video games has become common [5], likely due video games' popularity among youth and adults, key target markets [6], and to advertising's potential impact: in-game exposure to brands is memorable [7] and creates positive brand associations [8]. Many consumer product companies have embraced the concept, including Budweiser [9], Coca-Cola, and Subway [10].
The tobacco industry has long been a marketing innovator, inventing marketing media [11] and overcoming marketing restrictions [12]. Tobacco imagery is present in a substantial subset of video games played by adolescents, including those rated as "teen appropriate" by the Entertainment Software Ratings Board [13][14][15][16][17]. This imagery includes branded and unbranded tobacco products (e.g., discarded cigarettes, advertisements for fictional cigarette brands) and characters with lit cigarettes or cigars in their mouths or cigarette packs rolled into shirtsleeves [14][15][16]. The impact on adolescent smoking initiation of exposure to this imagery is unclear due to limited research and inconclusive results [14]. Some studies, for example, have found an association between video game playing and smoking, while others have not [14,18]; however, most suffer from methodological flaws, such as grouping video game playing with television or internet use, and small or non-representative samples [14].
There are several reasons to expect an association between exposure to tobacco imagery in video games and smoking initiation. Exposure to smoking scenes in movies is causally related to youth smoking behaviors, with the relationship explained through theories of media influence [15]: smoking in movies influences adolescent beliefs about the social acceptability and popularity of smoking, beliefs strongly linked to smoking initiation [15,19,20]. Viewing tobacco imagery in video games may have a similar impact on adolescent beliefs about smoking, and ultimately, on smoking behavior. Video games may also have a more direct impact on youth smoking. Engaging in virtual behaviors has been found to modify real-world behavior, with video games offering adolescents opportunities to try behaviors, including smoking, or identities, such as "smoker," that are rewarded or glorified in the game, and which then transfer to the real world [21-23].
Tobacco companies have been known to create their own video games [24] and to include video games on tobacco brand websites [25,26]. Yet researchers have not fully explored the tobacco industry's use of video games as a marketing tool. This paper uses internal tobacco industry documents to examine how and why tobacco companies have employed video games to market their products to youth and adults from the 1980s onwards.
standard tobacco industry document search strategies [28,30,31], which include starting with broad search terms ("video games," "online gaming") and using retrieved documents to identify more specific terms. Our initial broad search terms led to search terms related to brandrelated video games (e.g., Newport video game; Doral bingo); games developed for bar nights (e.g., Ultimate Powder; Sega racing simulators); games developed for brand websites (e.g., Camel casino; smokerswelcome.com); youth smoking prevention (e.g., buttoutnow.com; Crisis Crew); and game designers (e.g., Lazertron; Media Circus). These search terms returned thousands of documents. To narrow our findings, we excluded duplicates and documents unrelated to our topic of interest (such as tobacco company marketing activities that did not incorporate a video game component). We located additional relevant documents using a search feature that allows for the identification of documents with adjacent reference (Bates) numbers (sequential numbers stamped on every page as documents are produced in litigation; documents with sequential numbers are frequently related). We stopped searching when additional searches yielded no new documents.
We identified 293 documents that were relevant to our focus on tobacco companies' interest in video games as a marketing tool; their dates ranged from 1980 to 2008. These included marketing and promotion documents, contracts between tobacco companies and video game makers, tobacco company requests for proposals for video game designs, internal research on consumer behavior related to playing video games, and youth smoking prevention materials. For additional contextual information, we examined current and archived versions of several brand and corporate websites (e.g., Camel.com, buttoutnow.com), and the website Mobygames.com, an online database with user-supplied information on video games, including, for example, promotional and user screenshots.
We analyzed documents using a hermeneutic approach. Broadly, the term "hermeneutic" means interpretation of text, in which one tries to appraise the meaning of the material within the context of the time and place in which it was produced [32][33][34][35]. This approach involves identifying themes and thematic clusters, triangulating documentary data by looking for consistency among sources, and employing reliability and validity checks, by, for example, seeking investigator agreement regarding the interpretation of documents [36].
Consistent with this hermeneutic approach, we did not seek to test specific hypotheses about the tobacco industry's use of video games as a marketing tool [37][38][39]. Instead, to develop this interpretive account, the first author reviewed all documents and website material and took detailed notes, and both authors reviewed selected key documents. We relied upon iterative reviews of the documents and our notes to identify and evaluate common themes, construct a timeline of events, and assemble a case study [32,40]. We cite 97 tobacco industry documents in the text; a supplemental file contains a list of all relevant documents.

Initial ideas for capitalizing on the "video game craze"
In the 1980s, tobacco companies explored ways to capitalize on the "widespread video game craze" [41]. For example, in 1980, RJ Reynolds (RJR) tested the feasibility of a video game tournament as a promotional vehicle for its Camel brand among young adults [42]. ("Young adult" is the term that the industry began using in the 1970s in place of the more politically sensitive "youth," irrespective of any social psychological definition of young adulthood) [43]. An RJR employee noted that video games are among the fasting growing entertainment media in the world. Their popularity is particularly strong within the young adult segment of the marketplace. Video games have not yet been tapped by consumer package good companies seeking young adult loyalty. This puts the CAMEL family and [RJR] in a pre-emptive position [42].
RJR apparently did not pursue this idea to be the first tobacco company to use video games to market cigarettes to young adults, or at least not overtly: two years, later, in an October 1982 "idea session," Lorillard personnel noted that "The widespread video game craze has certain fundamental features which we could be the first to exploit" (emphasis added) [41]. Their suggestions were to incorporate video game imagery into pack design, or use product names such as "Galaxy," "Cosmos," and "Universe" to capitalize on space-themed video game popularity [41]. While these ideas were apparently rejected, in 1983, Lorillard took a page from RJR's book, adding video game contests (using existing games) to its spring break Newport promotion in Daytona Beach, Florida [44].
In 1985, RJR returned to the video game theme as it tried to design brands to compete with Marlboro among youth [45,46]. Marketing ideas for the new brands included video games as promotional vehicles, as branded games [47] or as "an advertising medium in bars/clubs" [48]. RJR also considered marketing existing brands near "video game arcades," where "youngeradult smokers 'hang out'" [49].

Tobacco company bar promotions incorporate video games
In the 1980s, tobacco companies began incorporating video games into product promotions in bars. Because bars restricted entry to those age 21 and over, they offered tobacco companies the opportunity to promote their products to young adults while avoiding criticism that they were targeting children [50]. The goals of bar promotions were to create and reinforce brand image; market to young adults in a smoker-friendly environment; encourage product trial; increase brand visibility; and generate names and addresses for companies' direct mail databases [50].
Because bar promotions already included party games (e.g., trivia contests, puzzles, and card games) [51-54], adding video games to the mix fit with bar night activities. However, video games offered advantages over party games. For example, they might include a "bright" "lit up" screen, which, in the words of a Philip Morris (PM) marketing manager, if seen from across the room, "will draw [the] attention [of] adult smokers to come over and participate" [55]. According to PM, due to their popularity and "high tech" nature, video games also generated more excitement, interest, and traffic [56, 57] than traditional party games [58] among young adults, who PM considered "extremely technology savvy" and eager to use new technology [58].
PM incorporated video games into its bar promotions (chiefly for its Marlboro brand) from the early 1990s onwards. For example, its Formula 1 racing-themed bar promotions (tied to its sponsorship of a Formula 1 team) included virtual racing simulators and laptop-based video games. Video game maker Sega manufactured PM's first 4 simulators [59], in which players raced to finish a computer-generated course, complete with physical cues: "Hit a retaining wall and your cockpit shudders. Take a turn too fast and an airbag inflates at your side, simulating the G-forces that push real drivers around in the saddle. Brake hard and the seat pitches you forward" [60]. To enable "easy viewing by spectators," three 19" monitors were positioned above the simulators [61]. There was Marlboro branding on the cars and the monitor frames "to create added excitement and on-site awareness" [60, 62]. Winners received branded merchandise (t-shirts, watches, etc.) [63], until 1999, when the Master Settlement Agreement prohibited such activity. To participate, bar patrons were required to fill out a "survey" that included their name, address, date of birth, gender, current and previous brand preferences, purchase patterns, and contact information for other smokers "willing to receive free cigarettes and incentive items in the mail" [63]. A journalist observing players noted that the simulator was compelling enough that nonsmokers also "filled out the survey to say that they [smoked] in order to play the video game" [64].
After determining that the simulators were a stronger draw than laptop-based video games [59], PM spent $712,652 between 1997 and 2001 for 24 simulators to expand racing-themed bar promotions. These simulators used an existing computer-based game, IndyCar Racing II, made by Sierra Papyrus, with the software customized to include Marlboro logos on the cars [65] and a "branded cowling to cover the [computer] monitor and pedestal" [66]. In 1997, 104,400 people attended bar nights with racing simulators (approximately 300 at each event), generating 13,100 names for PM's direct marketing database (78% of which were new) [67].
PM also demonstrated interest in developing a virtual reality game for Marlboro promotions, one that would "immerse players in a 3-D generated computer world" [68]. As described in a consultants' presentation, a virtual reality game offers a tremendous 'crowd attractant' factor. Since the technology is unique and not always accessible, it attracts people who have not previously been able to experience it. . . . [It] commands very high visibility and garners extraordinary FREE media/publicity exposure-everyone will want to see the hottest thing traveling through town. . . . There is no doubt about the positive brand association which will impact not only participating consumers, but [also] people they tell about their exciting experiences [68].
In September 1995, PM agreed to pay game designers Media Circus approximately $500,000 to create a 4 minute, 3-dimensionsal, virtual reality, Marlboro branded driving experience" [69, 70] for bar nights [71-74]. PM had high hopes for the game: the kickoff meeting summary stated that "We're counting on this game to be the hit of the night . . .[It] needs to be huge to represent the mega brand image" [75]. It was expected to have a "Disney like impact . . . a very big . . . experience in a small amount of space" [75]. This document also noted that they had replaced the descriptor "game" with "promotion," since "PMUSA does not promote to kids and [there is] sensitivity to 'game' internally. . .don't want to trivialize the . . . promotion" [75]. However, PM canceled the project several months later [76], possibly because of cost considerations [77].
Brown and Williamson (BW), whose KOOL brand sponsored auto racing in the late 1990s and early 2000s, invested approximately $450,000 in racing simulators for its KOOL bar nights [78]. Eight teams traveled the US visiting 42 cities for 4-5 week stays, holding bar nights 3-4 times per week, with two racing simulators providing an "'in your face' street racing experience" [79][80][81]. The program's goal was to "enhance contemporary brand image for KOOL" [82] particularly among young men [83]. The simulators were intended to help KOOL "own the evening" [84]. Young men who were surveyed about their KOOL bar night participation reported that the racing simulator event was "more fun than other sponsored bar nights"; 36% reported that their impression of KOOL was more favorable after the event [82].
Video games at tobacco company-sponsored bar nights were not focused exclusively on auto racing. For example, in 2000, PM paid Lazertron (later, Arcade Planet) $266,444 for 64 video game consoles and 64 copies of a specially-created Marlboro-branded downhill skiing game, "Ultimate Powder" [85]. The game's objective was to avoid obstacles and ski to the Marlboro party as quickly as possible [86]; it was used at bar nights promoting "Winter Ranch" sweepstakes, whose winners spent time at a Marlboro-themed Montana ranch [87]. In 2001, PM sought proposals to create 200 touch screen interactive kiosks that would host multiple video games and enable multi-player play [88]. The goal was to "provide a high visibility branding unit in a bar" that would "generate interest" among "tech savvy" young adult smokers (YAS) and "create talk value" about Marlboro events [58,88,89]. Design specifications noted that "screens should draw attention of YAS-use bright colors etc." [58]. Potential video games were western/ranch themed (e.g., "cowboy checkers," "wagon train"), in keeping with broader Marlboro advertising, and contained Marlboro branding on the introductory and exit screens [58, 90,91]. (It is unclear whether these kiosks were ever created).
RJR planned to launch a new Winston bar program in 2001, an update on the brand's 1996 "No Bull. No Boundaries" repositioning [92]. It featured virtual reality units that allowed players to experience sky diving, shark feeding, piloting a fighter jet, etc., in a fully branded Winston environment [92]; real-life versions of these experiences were offered to Winston sweepstakes winners [92]. RJR concluded that its target market, 21-34 year olds who "enjoy extreme activities and the thrill of life" [92] was a "perfect" match for virtual reality technology: "The mere sight of someone wearing a headset generates tremendous levels of interest" [93]. It sought bids from two companies, cautioning that games should be "durable" and simple enough for "intoxicated patrons" [93]. It is unclear whether any games were created; a 2002 proposal to consider a virtual reality concept "like nothing you have ever seen" for the 2003 Winston bar program suggested that RJR had not yet committed to the technology [94]. The cost may have been prohibitive: one bid was nearly $550,000 for one simulator (with software) [95].

Video games as in-home promotional tools
Tobacco companies also incorporated or considered incorporating video games into in-home product promotions. In 1999, as personal computer ownership was becoming more common, RJR offered Doral smokers steep discounts on video games on CD-ROMs (e.g., Pro Bass Fishing, Beat the House II) with proofs-of-purchase [96,97]. The goal was to "attract younger adult smokers (ages 21-35)," changing their image of the brand "while rewarding existing customers" [98]. The promotion was deemed a success, with more CD-ROMs requested than anticipated [99]. Marketing consultants recommended that RJR consider a similar promotion for Winston, partnering with a game developer to create a NASCAR-themed game (with minimal or expansive Winston branding) [99]. The consultants noted that the "opportunity exists for Winston to pre-empt P[hilip] M[orris] on the use of software in promotions" [99]. Initially, two developers "declined to participate with a tobacco company," but after "discussions with RJR and NASCAR top management," one reconsidered [99]. The company, Papyrus, released a NASCAR-themed game in 2001 that referenced the Winston cup (including in a billboard inside the game) but it is unclear whether it included other Winston advertising [100].
In 2004, BW's KOOL Mixx promotion included a CD-ROM with games "to test your hip hop skills," distributed in magazines such as Rolling Stone and Vibe [101]. The company was sued by various attorneys general for targeting youth in violation of the Master Settlement Agreement [101], and initially agreed to stop distributing the CD-ROM [102]; RJR, which acquired BW, agreed to a more comprehensive settlement, including limiting distribution of any future CD-ROMs to "adult-only" facilities and by mail to known adult smokers [103].
In the early 2000s, tobacco companies began creating brand websites, which represented a "powerful new marketing vehicle" that could "bring brand positioning to life" through "sight, sound, [and] motion" [104]. Among the first was RJR's Doral website, which included four games, bingo, skeet shooting, crosswords, and bowling [105]. Other brand websites also considered including video games as a way to "generate repeat traffic" [106]. By 2005, all of RJR's major brands (Camel, KOOL, Winston, Salem, etc.) had websites [107] and several featured games tied to brand promotions. For example, the 2005 Camel website featured "Camel Casino," which allowed players to play games such as blackjack and poker [108]; poker "chips" were distributed on packs, at events, via direct marketing, and via email [109], with the goal of "driv[ing] adult smokers to the brand's website" for prize redemption or competition in multi-player or individual games [110]. The company that partnered with RJR on the games, Arkadium, noted that "interactive online games engage consumers with brands in a way never before possible," with players "devot[ing] significant time and emotional investment in games" [111]. From 2007-2008, Camel Casino was the second most popular section of Camel's website, after the home page, drawing 591,542 visits [112].
KOOL had a "Play on the House/Spades Slam" promotion at retail and in bars in 2002; in 2003, it added an online component that allowed website visitors to play spades against the computer or other online players [113]. Consultants hired by BW to examine the website's effectiveness interviewed 125 smokers aged 21-29 who had registered for and spent at least 3 minutes on the website [113]. 33% spent more than 30 minutes on the website; 23% visited 6 or more times [113]. The game was the most popular website feature, the "anchor" for website activity, [and had a positive impact on KOOL brand image and purchase among those who usually smoked other brands [113].
As tobacco companies began creating youth smoking prevention (YSP) programs in the late 1990s [114], several considered building YSP-branded websites for kids, complete with video games, a "traffic driver" for kids' sites [115]. PM, for example, hired consultants in 1998 and 1999 to propose website options for its Think. . .Don't Smoke YSP program [116,117]. Possibilities included creating a new website with a "Nascar style racing game with 'Don't Smoke' messages built in (e.g., in leader board)" [118]. One PM consultant raised the issue of capturing kids' personal information, and recommended requiring parental permission to use any PM-sponsored YSP website [119]. The consultant also pointed out that a decision to create a PM-sponsored website would mean that PM was taking responsibility for "privacy, security, data capture, parental permission, monitoring" and for "marketing expertise about kids (in fact, this will be implicit just by having such a site)" [119]. PM continued exploring the idea of a YSP program web presence, complete with sports-themed video games (snowboarding, BMX bike riding) [120]; however, it ultimately chose not to create one.
Lorillard, by contrast, moved forward with a website for teens in December 1999, buttoutnow.com, to complement its "Tobacco is Whacko if You're a Teen" YSP program. The goal of the YSP program was to "address the youth smoking issue in a responsible and visible manner" [121] (emphasis added), and a web presence, with games, helped advance that goal by "keep [ing] kids at the site" [122]. The website initially included two video games, "the Search," and "Crisis Crew" [123]. The Search involved searching for missing puzzle pieces in a poster featuring the Tobacco is Whacko character [124,125]. The object of Crisis Crew was to avoid a smoking dragon (and demonstrate the value of teamwork and leadership) by assigning various tasks to a group of kids (e.g., building ladders or sailing a ship) [125][126][127].
The available documents suggest that parental permission was not required for website access, although the privacy policy recommended that visitors aged 13 to 17 "seek parental consent before providing any [personally identifiable information]" [128]. After one year, the website had drawn nearly 600,000 visitors [129], with the games ranking second in popularity, well behind the top attraction, information on Lorillard's college scholarship program [130]. Both games were replaced in 2002 to "increase traffic and repeat visitors" [131]. The replacement game featured a skateboarder who fought "against time, physics, and obstacles to spread the anti-smoking message" [132 -134]. Traffic did increase in 2002, with the college scholarship pages still the most popular portion of the website [132]. The website appears to have been active until April 2004 [135]. Although exposure to television advertisements for Lorillard and PM's YSP programs was found to be associated with stronger youth approval of smoking and intentions to smoke, weaker perceptions of smoking-related harms, and greater likelihood of current smoking [136], research has not explored whether the inclusion of video games on Lorillard's website had a similar impact on youth.

Discussion
Tobacco companies recognized the marketing potential of video games early in the history of the "video game craze." Although initial ideas for how to capitalize on this craze included creating packaging and brand names evocative of video games and advertising existing brands near video game arcades, tobacco companies settled on more immersive and interactive marketing strategies. These included adding video game components to bar nights, a common strategy across companies, which saw video games as a way to attract "tech savvy" young adults' attention and interest, thereby persuading smokers (and in some cases nonsmokers) to provide personal information for tobacco company marketing databases in order to play the games. Inclusion in these databases put participating bargoers at risk: the receipt of direct mail coupons from tobacco companies is associated with smoking initiation among nonsmokers and continued smoking among smokers [137,138].
Video games remain a feature of tobacco company bar nights and traveling "lounges" [139,140]. It is unclear how large of a draw they are, given that consumers now have greater access to video games than they did in the 1990s; however, it seems unlikely that video games would remain a component of these events if they no longer advanced tobacco company goals. Recent technological advances and reduced costs associated with virtual reality games may enable tobacco companies to replace standard video games with a type of game to which they attached high hopes in the mid-1990s and early 2000s. If it met expectations, the fully-branded, immersive, "Disney-like" experience of virtual reality would be a big draw-particularly given the expense of purchasing the technology oneself and the limited content available [141]. "Disney-like" popularity would ensure the continued growth of tobacco company direct marketing databases, facilitating long-term exposure to tobacco marketing.
Tobacco companies incorporated video games into in-home brand marketing and promotion efforts as well. Video games (both branded and unbranded) were an appealing component of these promotions because they promised to attract a younger audience-an appeal recognized by the attorneys general who brought legal action against BW for its "KOOL Mix" promotion. Branded video games also offered the potential for recurring brand exposures to players of all ages through repeat playing, a feature absent from video games played at bar nights, and one with direct implications for smoking behavior. Although research exploring the relationship between viewing tobacco imagery in video games and subsequent tobaccorelated behavior is still in its infancy [14], there is an established causal relationship between exposure to tobacco marketing in many different media and youth smoking initiation and progression to regular smoking [15]. Exposure to tobacco marketing for even a limited time can create positive perceptions of smoking and smokers and influence intentions to smoke among youth [15]. Thus, repeat exposure to tobacco imagery in video games played at home is a critical cause for concern.
Tobacco companies also relied on the popularity of video games to draw visitors to brand and corporate websites. As others have noted, websites offer tobacco companies distinct advantages over traditional media in terms of interactivity, length of exposure, and avoidance of marketing restrictions [25,142]. Video games offer similar advantages, and are thus a natural fit for tobacco brand websites. On brand websites, video games were not only among the most popular features, but, as suggested by internal research, their inclusion may help achieve two perennial tobacco company marketing goals: improving brand image and influencing purchasing decisions. Online video games-which continue to be a feature of tobacco brand websites [25, 26]-thus represent a powerful, and, for the moment, largely unregulated tobacco marketing tool. The same is true of online games on tobacco companies' corporate websites. This appears to be less of a concern at the moment, however. Lorillard was the only tobacco company willing to proceed with a website designed specifically for youth, apparently unconcerned about any potential controversy over collecting data about children that could be used for marketing purposes. This website became inactive in 2004, and we are unaware of other tobacco companies sponsoring similar websites for youth.
In the US, the Master Settlement Agreement places limits on paid tobacco product placement in video games. Our study found no evidence that tobacco companies paid for product placement; instead, the documents we uncovered point to more direct relationships, with tobacco companies commissioning branded games that promoted a particular brand (or corporate) image. Addressing these relationships and eliminating the use of video games as a promotional vehicle may require an approach that focuses on limiting tobacco marketing in both physical and online environments. Indeed, the WHO Framework Convention on Tobacco Control recommends prohibiting "any form of commercial communication . . . with the aim, effect or likely effect of promoting a tobacco product or tobacco use either directly or indirectly" [143]. In the US, the 2009 Family Smoking Prevention and Tobacco Control Act gives the Food and Drug Administration broad authority to regulate tobacco marketing in order to promote overall public health [144]. Thus, in some jurisdictions, it may be possible to restrict tobacco branding or other tobacco imagery in video games. Media campaigns to denormalize tobacco content in video games and more focused efforts to capitalize on some game makers' apparent reluctance to work with tobacco companies, as occurred with RJR in the 1990s, could also be considered.
Our study provides only a partial understanding of the tobacco industry's use of video games as a marketing tool. Due to the size of the document databases, we may not have retrieved every relevant document. Some may have been destroyed or concealed by tobacco companies, including, for example, any documents concerning payments for tobacco product placement in video games; others may have never been obtained in the legal discovery process.

Conclusions
Since the activities outlined here, video games have become more sophisticated, ubiquitous, and global, and tobacco content in games has become commonplace [145]. Video game players remain an attractive target market for tobacco companies, and we can expect continued tobacco industry interest in using games to attract and engage consumers. Given the established causal link between exposure to tobacco content in films and youth smoking initiation [15,146], the tobacco industry's continued interest in video games as a marketing tool poses a challenge to tobacco control. Strategies to address this challenge are needed.