IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v19y2018i4d10.1057_s41260-018-0081-z.html
   My bibliography  Save this article

The impact of working capital management on firms’ performance and value: evidence from Egypt

Author

Listed:
  • Amr Ahmed Moussa

    (Cairo University)

Abstract

The purpose of this study was to explore the impact of working capital management (WCM) on firms’ performance and value for a sample of Egyptian firms. Two empirical models were established to test the impact of WCM, as measured by the cash conversion cycle (CCC) on firms’ performance and market valuation. A panel data analysis for 68 industrial firms listed in the Egyptian Stock Exchange for the period 2000–2010 was employed, along with different generalized methods of moments techniques to test the validity of the research hypotheses. The first model demonstrated that firm performance is positively associated with CCC length, which implies that firms with high performance rates pay less attention to WCM. The second model revealed that there exists a positive relationship between firm value and the CCC, which indicates that investors in the Egyptian Stock Exchange value firms with a longer CCC. Insights generated from the current study show that stock markets in less developed economies, such as Egypt’s, fail to realize optimum efficiency of their WCM. Therefore, policy-makers in Egypt need to improve the awareness of managers and shareholders regarding the usefulness of WCM.

Suggested Citation

  • Amr Ahmed Moussa, 2018. "The impact of working capital management on firms’ performance and value: evidence from Egypt," Journal of Asset Management, Palgrave Macmillan, vol. 19(4), pages 259-273, July.
    • Handle: RePEc:pal:assmgt:v:19:y:2018:i:4:d:10.1057_s41260-018-0081-z
    DOI: 10.1057/s41260-018-0081-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41260-018-0081-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41260-018-0081-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gamze VURAL & Ahmet G khan S KMEN & Emin H seyin CETENAK, 2012. "Affects of Working Capital Management on Firm's Performance: Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 488-495.
    2. Shaista Wasiuzzaman, 2015. "Working capital and firm value in an emerging market," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 11(1), pages 60-79, February.
    3. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    4. Morris Lamberson, 1995. "Changes in Working Capital of Small Firms in Relation to Changes in Economic Activity," American Journal of Business, Emerald Group Publishing, vol. 10(2), pages 45-50.
    5. Bana Abuzayed, 2012. "Working capital management and firms’ performance in emerging markets: the case of Jordan," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 8(2), pages 155-179, March.
    6. 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.
    7. 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.
    8. A.K. Sharma & Satish Kumar, 2011. "Effect of Working Capital Management on Firm Profitability," Global Business Review, International Management Institute, vol. 12(1), pages 159-173, February.
    9. Walter Gachira & Washington Chiwanzwa & Dingilizwe Nkomo & Runesu Chikore, 2014. "Working Capital Management and the Profitability of Non- Financial Firms Listed on the Zimbabwe Stock Exchange (ZSE)," European Journal of Business and Economics, Central Bohemia University, vol. 9(2), pages 5171:9-5171, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joseph Antwi Baafi & Eric Effah Sarkodie & John Kwame Duodu & Seyram Pearl Kumah, 2024. "Why Should We Pay Attention to Working Capital Management? A Case of Ghana," Businesses, MDPI, vol. 4(1), pages 1-18, March.
    2. Sorin Gabriel Anton & Anca Elena Afloarei Nucu, 2020. "The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms," JRFM, MDPI, vol. 14(1), pages 1-14, December.
    3. Max M. Weber & Peter Kokott, 2024. "Organizational Resilience and the Attention-Based View of the Firm—Empirical Evidence from German SMEs," Sustainability, MDPI, vol. 16(11), pages 1-24, May.
    4. Ahmed Mohamed Habib & Umar Nawaz Kayani, 2023. "Evaluating the Super-Efficiency of Working Capital Management Using Data Envelopment Analysis: Does COVID-19 Matter?," SN Operations Research Forum, Springer, vol. 4(2), pages 1-20, June.
    5. Sarfraz Hussain & Van Chien Nguyen & Quang Minh Nguyen & Huu Tinh Nguyen & Thu Thuy Nguyen, 2021. "Macroeconomic factors, working capital management, and firm performance—A static and dynamic panel analysis," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-14, December.
    6. XueHui Zhang & Kun-Shan Wu & Mingwen He, 2023. "Concave-convex effect of financial resilience on corporate financial performance: quantile regression approach," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.
    7. Berna Doğan Başar & Ahmed Bouteska & Burak Büyükoğlu & İbrahim Halil Ekşi, 2021. "The effect of corporate governance on bank performance: evidence from Turkish and some MENA countries banks," Journal of Asset Management, Palgrave Macmillan, vol. 22(3), pages 153-162, May.
    8. Mutambara Tatenda Emmanuel & Nyatanga Phocenah & McCullough Kerry, 2023. "The Impact of Working Capital and Macroeconomic Variables on the Profitability of Listed Industrial Firms in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 13(5), pages 32-42, September.

    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. Muhammad Azeem Naz & Rizwan Ali & Ramiz Ur Rehman & Collins G. Ntim, 2022. "Corporate governance, working capital management, and firm performance: Some new insights from agency theory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1448-1461, July.
    2. Zheng, Xiaotian & Zhou, Youcheng & Iqbal, Sajid, 2022. "Working capital management of SMEs in COVID-19: role of managerial personality traits and overconfidence behavior," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 439-451.
    3. 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.
    4. 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.
    5. Tarek Ibrahim Eldomiaty & Mohamed Hashem Rashwan & Mohamed Bahaa El Din & Waleed Tayel, 2016. "Firm, industry and economic determinants of working capital at risk," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1-29, December.
    6. Kwadwo Boateng Prempeh Godfred Peprah-Amankona, 2020. "Does Working Capital Management Affect Profitability of Ghanaian Manufacturing Firms?," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 23(1), pages 1-18, May.
    7. Najib H. S Farhan & Faozi A. Almaqtari & Ebrahim Mohammed Al-Matari & Nabil Ahmed M. SENAN & Waleed M. Alahdal & Saddam A. Hazaea, 2021. "Working Capital Management Policies in Indian Listed Firms: A State-Wise Analysis," Sustainability, MDPI, vol. 13(8), pages 1-25, April.
    8. Mohammad Tahir & Melati Anuar, 2016. "The determinants of working capital management and firms performance of textile sector in pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 605-618, March.
    9. Bilgehan TEKİN & Yusuf GÖR, 2022. "Cash conversion cycle and its relationship with profitability as a cash management tool in companies: An application on companies trading in Borsa Istanbul," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(632), A), pages 113-130, Autumn.
    10. Luca Sensini & Maria Vazquez, 2023. "Effects of Working Capital Management on SME Profitability: Evidence from an Emerging Economy," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(4), pages 1-85, February.
    11. Nitya Nand Tripathi & Naseem Ahamed, 2017. "Time Taken to Reach the Performance Summit: Nature of Relation Between Working Capital Management and Firm Performance in the Indian Context," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 530-536.
    12. Turki Alshammari, 2020. "Are Trade Policies Performance Enhancing? The Special Case of the GCC Countries," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 42-55, October.
    13. Tanveer Bagh & Muhammad Imran Nazir & Muhammad Asif Khan & Muhammad Atif Khan & Sadaf Razzaq, 2016. "The Impact of Working Capital Management on Firms Financial Performance: Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1097-1105.
    14. Shikha Bhatia & Aman Srivastava, 2016. "Working Capital Management and Firm Performance in Emerging Economies: Evidence from India," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 41(2), pages 71-87, May.
    15. Sin Huei Ng & Chen Ye & Tze San Ong & Boon Heng Teh, 2017. "The Impact of Working Capital Management on Firm's Profitability: Evidence from Malaysian Listed Manufacturing Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 662-670.
    16. Tuba DERYA-BASKAN & Eda BALIKÇIOĞLU, 2018. "Firma Bileşenlerinin Halka Açık Perakende Firmalarında Kurumlar Vergisine Etkisi," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(37).
    17. Talat Afza, 2011. "Working Capital Management Efficiency of Cement Sector of Pakistan," Journal of Economics and Behavioral Studies, AMH International, vol. 2(5), pages 223-235.
    18. Giorgio Calcagnini & Annalisa Ferrando & Germana Giombini, 2015. "Multiple market imperfections, firm profitability and investment," European Journal of Law and Economics, Springer, vol. 40(1), pages 95-120, August.
    19. Kebewar, Mazen & Shah, Syed Muhammad Noaman Ahmed, 2013. "The effect of debt on corporate profitability: Evidence from French service sector," EconStor Preprints 73556, ZBW - Leibniz Information Centre for Economics.
    20. Mazen Kebewar & Ahmed Shah Syed Muhammad Noaman, 2013. "The effect of debt on corporate profitability Evidence from French service sector," Working Papers halshs-00825178, HAL.

    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:pal:assmgt:v:19:y:2018:i:4:d:10.1057_s41260-018-0081-z. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    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.