Working capital management and profitability: Evidence from Jordanian mining and extraction industry sector

khaled lafi al-naif, Ata Elayan M. Al Shra'ah

الملخص


This paper sought to ascertain the existence of the relationship between the working capital management components )cash conversion cycle, receivables collection period, inventory conversion period, and the payment period) and corporate's profitability in the presence of two control variables (corporate's size and debt ratio), in the mining and extraction industry sector of the Jordanian economy. The study sample consists of 9 ASE listed corporations in this sector over a period of 17 years from 2000 to 2016, resulting in 153 firm-year observations.
The study employed four model specifications in order to test the postulated hypotheses. Pearson’s correlation and Panel data methodology employed.
The results from the random effect model are prolific enough to depict that there is a strong negative relationship between the components of the working capital management and the corporate's profitability. Similarly, there is a negative relationship between the debt ratio and the profitability of the firm. Finally, a positive relationship is observed between the corporate's size and profitability.
The practical implications of this study are that the corporation manager in mining and extraction Industry Corporation must consider the importance of shortening length of working capital management and its components (especially inventory) to a minimum level in formulating their policies, in order to operate efficiently and effectively because the length of WCM is closely and significantly related to corporation profitability.

الكلمات المفتاحية


Working Capital Management, liquidity, profitability, Jordan

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Creative Commons License
هذا العمل مرخص حسب Creative Commons Attribution 4.0 International License.