Net Working Capital and Firm Growth

• Main Author: Alaa Adden A. Abuhommous
• Format: Article
• Language: English
• Published: EconJournals 2017-10-01
• Series: International Review of Management and Marketing
• Online Access: https://www.econjournals.com/index.php/irmm/article/view/5184

<p class="Pa7">There are many empirical studies that have analyzed firms’ growth; however, there has not been a direct examination of the relationship between working capital management and firm growth. Thus, this study examines the effect of the working capital level on the growth of firms from a sample of Jordanian firms; the data are unbalanced data for the period from 1999 to 2015. The study extends the literature on firm growth and finds evidence that investment in working capital has a positive effect on firm growth. The paper also shows that young and small firms grow more than mature and large firms. Moreover, we find that a high level of internal cash flow decreases a firm’s growth. We also find a positive relationship between the market expectation and market-based financial performance and firm growth.</p><h1><strong>Keywords:</strong> Finance, Investment, Firm Growth, Net Working Capital</h1><h1><strong><br /></strong></h1><h1><strong>JEL Classifications:</strong> L25, L11</h1>