IDEAS home Printed from https://ideas.repec.org/a/jfr/afr111/v7y2018i2p155.html

The Determinants of Working Capital Management in the Egyptian SMEs

Author

Listed:
  • Ahmed Elbadry

Abstract

Purpose– This paper explores the main determinants of working capital management in the Egyptian SMEs and explains its effect on working capital management. Also, I examine the relation between working capital management and SMEs' profitability and capital structure.Design/methodology/approach – The study sample include data for 138 SMEs working in Egypt and financed by the national bank of Egypt from 2010 to 2013. Data have been collected from SMEs financial statements for four years for each company. OLS regression models have been used to examine the effect of working capital determinants on working capital level measured by CCC. We used firm size and industry as control variables and robustness our results using full regression models for every year of analysis. All regression models were checked for normality, multicollinearity and hetroscedisticity.  Findings – The main results reflect a negative and significant effect of SMEs profitability, tangible fixed assets, and leverage. Also, the industry represents a significant factor in determining the level of working capital in the Egyptian SMEs. Moreover, the effect of working capital management and SMEs profitability and capital structure decisions has been examined. The results reflect that the Egyptian SMEs follow an aggressive policy as businesses hold low level working capital which leads to high return and high degree of risk (measured by LEVERAGE).Research limitations/implications – The study limited to the Egyptian SMEs and financed by the National Bank of Egypt. Originality/value – The study explores the main determinants of working capital in the Egyptian SMEs and examined its effect on working capital management. Also, we examined the effect of working capital determinants on each component of working capital measured by cash conversion cycle. Moreover, I examined the effect of working capital on SMEs' profitability and capital structure decisions.

Suggested Citation

  • Ahmed Elbadry, 2018. "The Determinants of Working Capital Management in the Egyptian SMEs," Accounting and Finance Research, Sciedu Press, vol. 7(2), pages 155-155, May.
    • Handle: RePEc:jfr:afr111:v:7:y:2018:i:2:p:155
    as

    Download full text from publisher

    File URL: https://www.sciedupress.com/journal/index.php/afr/article/download/13052/8150
    Download Restriction: no
    File URL: https://www.sciedupress.com/journal/index.php/afr/article/view/13052
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    2. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    3. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
    4. Utkarsh Goel & Anil Sharma, 2015. "Working capital management efficiency in Indian manufacturing sector: trends and determinants," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 10(1), pages 30-45.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ishfaq Gulzar & S. M. Imamul Haque, 2023. "The Implications of Corporate Governance on the Working Capital Efficiency of Manufacturing Companies: Evidence from Emerging Market," Jindal Journal of Business Research, , vol. 12(2), pages 160-173, December.
    2. Chen, Catherine Huirong & Choy, Siu Kai & Tan, Yongxian, 2022. "The cash conversion cycle spread: International evidence," Journal of Banking & Finance, Elsevier, vol. 140(C).
    3. Matthew D. Hill & G. Wayne Kelly & Michael J. Highfield, 2010. "Net Operating Working Capital Behavior: A First Look," Financial Management, Financial Management Association International, vol. 39(2), pages 783-805, June.
    4. Malik, Zafar Ullah & Iqbal, Athar, 2012. "Affect of Working Capital Management on Firms Profitability in Sugar Industry of Pakistan," MPRA Paper 41436, University Library of Munich, Germany.
    5. Hong, Liu & Jain, Bharat A. & Shao, Yingying, 2024. "Family firm governance and working capital management policy," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    6. Athira A & Vishnu K & Rajeev A, 2025. "Economic policy uncertainty and trade credit: international evidence," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 49(2), pages 613-660, June.
    7. Chang, Chong-Chuo, 2018. "Cash conversion cycle and corporate performance: Global evidence," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 568-581.
    8. Afrifa, Godfred & Tingbani, Ishmael, 2017. "Working Capital Management, Cash Flow and SMEs’ Performance," MPRA Paper 82894, University Library of Munich, Germany, revised Oct 2017.
    9. Julia Koralun-Bereźnicka, 2014. "On the Relative Importance of Corporate Working Capital Determinants: Findings from the EU Countries," Contemporary Economics, Vizja University, vol. 8(4), December.
    10. José Manuel Mansilla-Fernández & Juliette Milgram-Baleix, 2023. "Working capital management, financial constraints and exports: evidence from European and US manufacturers," Empirical Economics, Springer, vol. 64(4), pages 1769-1810, April.
    11. Godfred Adjapong Afrifa & Ahmad Alshehabi & Ishmael Tingbani & Hussein Halabi, 2021. "Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 581-617, February.
    12. Liu, Guangqiang & Wang, Shenghua, 2023. "Digital transformation and trade credit provision: Evidence from China," Research in International Business and Finance, Elsevier, vol. 64(C).
    13. Abudu Braimah & Yinping Mu & Isaac Quaye & Alhassan Abubakar Ibrahim, 2021. "Working Capital Management and SMEs Profitability in Emerging Economies: The Ghanaian Case," SAGE Open, , vol. 11(1), pages 21582440219, February.
    14. Małgotrzata B. Okręglicka, 2014. "The Economic Recession And Working Capital Management Of Companies In Poland," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 8(1), pages 696-706.
    15. Nguyen An Thanh Hong & Nguyen Tuan Van, 2018. "Working Capital Management and Corporate Profitability: Empirical Evidence from Vietnam," Foundations of Management, Sciendo, vol. 10(1), pages 195-206, September.
    16. Woo Sung Kim, 2016. "Determinants of Corporate Trade Credit: An Empirical Study on Korean Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 414-419.
    17. Ahmed Mohamed Habib & Nahia Mourad, 2022. "Analyzing the Efficiency of Working Capital Management: a New Approach Based on DEA-Malmquist Technology," SN Operations Research Forum, Springer, vol. 3(3), pages 1-20, September.
    18. Sumathi Kumaraswamy, 2016. "Impact of Working Capital on Financial Performance of Gulf Cooperation Council Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1136-1142.
    19. David Rodeiro‐Pazos & Sara Fernández‐López & Raúl Rios‐Rodríguez & Adrián Dios‐Vicente, 2023. "Working capital management and firm sales growth: Evidence from fish processing industry," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 1254-1278, October.
    20. Ding, Sai & Guariglia, Alessandra & Knight, John, 2013. "Investment and financing constraints in China: Does working capital management make a difference?," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1490-1507.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jfr:afr111:v:7:y:2018:i:2:p:155. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sciedu Press (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.