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Volume :48 Issue : 186 2022      Add To Cart                                                                    Download

Efficiency Effect of Managing Working Capital on the Performance of GCC Listed Firms

Auther : Dr. Turki B. Alshammari

Objectives: This study investigates the effect of working capital management efficiency on corporate performance as well as the determinants of the working capital for all non-financial firms operating in the Gulf Cooperation Council countries. Method: This study follows a statistical methodology whereas it mainly employs different types of regression analysis that fit the nature of the cross-sectional data such as the fixed-effect model, the pooled regression, and the generalized method of moments ‘GMM’ so as to confirm the robustness of the results, as these methods consider some limitations of the usual OLS method. This study uses financial data of all GCC non-financial firms during the period 2012 – 2018 for the six GCC countries; Kuwait, KSA, Bahrain, Qatar, UAE, and Oman. It used the proper financial data that are required to accomplish the goal of the study such as the net working capital, as an indicator to the working capital efficiency, as well as two measures of the financial performance; the ROA and Tobin’s Q in order to corroborate the results. Results: The study findings indicate the significant effect of working capital management on GCC corporate performance, using the two performance measures, the ROA and Tobin’s Q. Also, the results show that the most important determinants of the working capital for GCC non-financial firms that positively affect net working capital are the previous level of net working capital, net income, long term debt, while firm size and market share influence working capital negatively. The results are similar irrespective of the employed statistical methodology. Conclusion: The study findings indicate the significant effect of working capital management on GCC corporate performance, using the two performance measures, the ROA and Tobin’s Q. Also, the results show that the most important determinants of the working capital for GCC non-financial firms that positively affect net working capital are the previous level of net working capital, net income, long term debt, while firm size and market share influence working capital negatively. The results are similar irrespective of the employed statistical methodology.

 
Keywords: ROA, Tobin’s Q, Net working capital, GCC, GMM.

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