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

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  • 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
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    5. 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.
    6. 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.
    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.

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