working capital management and firm performanc.DOCXVIP

Working Capital Management and Firm PerformanceAn Analysis of Jordanian Industrial FirmsDr. Thair A. KaddumiAssociate Prof.Finance and Banking Science Department, Applied Science Private University, JordanP.O. Box 166 Postal Code 11931 – Amman – JordanTel: +962-795-004-334 E-mail: mailto:thair_lion@.jothair_lion@.jo Dr. Imad Z. RamadanAssociate Prof.Finance and Banking Science Department, Applied Science Private University, JordanP.O. Box 166 Postal Code 11931 – Amman – JordanTel: +962-796-177-911 E-mail: prof_imad67@AbstractThis paper aims to investigate the effect of working capital management on the performance. Utilizing unbalanced data for a sample of 49 Jordanian Industrial firms listed at Amman Stock Exchange from 2005 to 2009. Using two alternative measures of profitability as proxy for the performance and five proxies for the Working Capital Management, estimation of twenty models panel data cross-sectional time series have been tested employing two regression models; the Fixed-Effects Model and the Ordinary Least Squares Model. The findings of our study found to be significantly consistent with the view of the traditional working capital theory. The results suggest that working capital management and performance are positively correlated. The regression results also concluded that the Jordanian industrial firms follow a conservative investing policy and less aggressive financing policy in the working capital, and a well-efficient managing of the working capital can add value to the shareholders wealth. Keywords: Working Capital, Performance, Efficient management, Jordan1. IntroductionWorking capital management has profitability and liquidity implications. Hence, working capital proposes a familiar front for profitability and liquidity management. (Amalendu Bhunia,2010) (Raheman and Nasr, 2007) as efficient working capital management is necessary for achieving both liquidity and profitability of a company. A poor and inefficient working capital manageme