Articlegold2022

The effect of working capital management and credit management policy on Jordanian banks’ financial performance

Abdul Nafea Al-Zararee · Nashat Ali Almasria · Qasim Ahmad Alawaqleh

37 citations0/0 files storedBanks and Bank Systems

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Working Capital and Financial Performance Banking stability, regulation, efficiency Banking Sector Performance and Management

Abstract

This study investigated the impact of Working Capital Management (WCM) and Credit Management Policy (CMP) on the Financial Performance (FP) of Jordanian banks (JB). The study data were obtained from 16 Jordanian banks listed on the Amman Stock Exchange (ASE) between 2017 and 2020. The study used panel data to investigate the relationship between the two independent variables, WCM and CMP, and the dependent variable FP; 64 financial reports to Jordanian banks were analyzed to measure this relationship. To test hypotheses, multiple regression was used. The study found a statistically significant relationship between WCM and FP, and the independent variable was able to explain 34.1% of the changes that occur in the dependent variable. In addition, the outcome approved that there is a statistically significant relationship between CMP and FP. Furthermore, CMP explained about 41.8% of changes in the dependent variable. The findings of this study indicate support for the banks’ performance; a bank may need to lengthen client credit terms, prolong the cash transfer cycle, and require a more extended payment period when judging on WCM. Acknowledgment The publication of this research has been supported by the Deanship of Scientific Research and Graduate Studies at Philadelphia University – Jordan.

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References

2007Effects of working capital management on SME profitability 2007WORKING CAPITAL MANAGEMENT AND PROFITABILITY-CASE OF PAKISTANI FIRMS 2006Relationship Between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange 2009The Influence of Working Capital Management Components on Corporate Profitability: A Survey on Kenyan Listed Firms 1996Trade Credit, Product Quality, and Intragroup Trade: Some European Evidence 2012Working capital management and firms’ performance in emerging markets: the case of Jordan 1998Market orientation and performance: empirical tests in a transition economy 2009Impact of Aggressive Working Capital Management Policy on Firms' Profitability

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