The Impact of Working Capital Management on firm profitability of non-financial companies listed on Palestine Security Exchange

Abstract

This study aims to empirically examine the relationship between Working Capital management and profitability of non-financial listed firms on the Palestine Security Exchange (PSE). Working capital management focuses on managing the company's short-term assets and liabilities. Motivated by the resource-based view theory, this study developed a conceptual including four variables (Cash Conversion Cycle, Accounts receivable period, accounts payable period and Inventory holding period). Based on quantitative data (secondary data), the data was collected from 24 non-financial companies listed on PSE during the period 2015-2020, a total of 144 observations. The results show that the cash conversion cycle affects profitability positively. However, the accounts receivable period has a negative and significant relationship with profitability. The study contributes to the accounting literature by providing empirical evidence on the impact of the working capital management on profitability, and explains this relationship in the context of resource-based view theory. Shareholders, company directors of Palestinian listed companies, as well as managerial and financial consultants can benefit from the results of this study for their investment decisions.