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Net Working Capital and Firm Growth

Author

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  • Alaa Adden A. Abuhommous

    (Department of Banking and Finance, School of Business, Mutah University, Al-Karak, Jordan)

Abstract

There are many empirical studies that have analyzed firms’ growth; however, there has not been a direct examination of the relationship between working capital management and firm growth. Thus, this study examines the effect of the working capital level on the growth of firms from a sample of Jordanian firms; the data are unbalanced data for the period from 1999 to 2015. The study extends the literature on firm growth and finds evidence that investment in working capital has a positive effect on firm growth. The paper also shows that young and small firms grow more than mature and large firms. Moreover, we find that a high level of internal cash flow decreases a firm’s growth. We also find a positive relationship between the market expectation and market-based financial performance and firm growth.

Suggested Citation

  • Alaa Adden A. Abuhommous, 2017. "Net Working Capital and Firm Growth," International Review of Management and Marketing, Econjournals, vol. 7(4), pages 131-137.
    • Handle: RePEc:eco:journ3:2017-04-18
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    More about this item

    Keywords

    Finance; Investment; Firm Growth; Net Working Capital;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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