Abstract
The purpose of this study was to explore the impact of working capital management (WCM) on firms’ performance and value for a sample of Egyptian firms. Two empirical models were established to test the impact of WCM, as measured by the cash conversion cycle (CCC) on firms’ performance and market valuation. A panel data analysis for 68 industrial firms listed in the Egyptian Stock Exchange for the period 2000–2010 was employed, along with different generalized methods of moments techniques to test the validity of the research hypotheses. The first model demonstrated that firm performance is positively associated with CCC length, which implies that firms with high performance rates pay less attention to WCM. The second model revealed that there exists a positive relationship between firm value and the CCC, which indicates that investors in the Egyptian Stock Exchange value firms with a longer CCC. Insights generated from the current study show that stock markets in less developed economies, such as Egypt’s, fail to realize optimum efficiency of their WCM. Therefore, policy-makers in Egypt need to improve the awareness of managers and shareholders regarding the usefulness of WCM.
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