DOES WORKING CAPITAL MANAGEMENT AFFECT THE PROFITABILITY OF SMALL AND MEDIUM SIZED ENTERPRISES IN JORDAN?

Dima Waleed Hanna Alrabadi; Wasfi Al Salamat; Abdallah Hatamleh

Authors

Dima Waleed Hanna Alrabadi Department of Finance and Banking Sciences, Faculty of Economics and Business Administration Sciences, Yarmouk University, Jordan https://orcid.org/0000-0001-9321-1648
Wasfi Al Salamat Department of Banking and Financial Sciences, Faculty of Economics and Administrative Sciences The Hashemite University, P.O box 330127, Zarqa 13133, Jordan https://orcid.org/0000-0002-5000-3299
Abdallah Hatamleh Master in Finance and Banking Sciences Yarmouk University, Jordan https://orcid.org/0000-0002-0648-1816

Keywords:

Working capital, Profitability, SMEs, Panel data, Jordan

Abstract

This study aims to explore the impact of working capital management on Small and medium sized enterprises profitability in the context of Jordan through the period (2005-2018) after controlling for the size of firm, sales growth, and financial leverage. Balanced panel data regression is used for data analysis. The sample consists of 11 firms with a total of 154 annual observations. The results show that cash conversion cycle and financial leverage have a statistically significant negative effect on ROA of Jordanian SME’s. However, the following variables (investment policies of working capital, financing policies of working capital, the size of firm, and sales growth) have a statistically significant positive effect on ROA of Jordanian SMEs. Interestingly firm risk is also positive and significantly associated with the ROA.

DOES WORKING CAPITAL MANAGEMENT AFFECT THE PROFITABILITY OF SMALL AND MEDIUM SIZED ENTERPRISES IN JORDAN?

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