Abstract
This paper is an attempt to investigate the effect of working capital management, measured by (Current Ratio, Quick Ratio and Liquidity)on dependent variables (Return on Assets, Return on Equity and Earning Assets (Asset Quality) of insurance firms in Egypt, the study sample is 49% from total insurance firms working of the insurance market in Egypt in 1999- 2019.A structural equation modelling was selected to construct of the model of this study, The evidences show that There is a positive significant effect on construct of the independent variables, current ratio (x1), quick ratio (x2), and liquidity (x3) on construct of the dependent variables in terms of Return on Equity (Y1), at a probability level less than (0.001). This validates the first hypothesis; the independent variables Current Ratio(x1), Quick Ratio(x2), and Liquidity(x3) have a significant effect on the dependent variables Return on Equity (Y1), There is a positive significant effect on the construct of the independent variables, Current Ratio (x1), Quick Ratio (x2), and Liquidity (x3) on the construct of the dependent variables in terms of Earning Assets (Asset Quality) (Y3), probability level less than (0.001). This validates of the third hypothesis; the independent variables in terms of Current Ratio (x1), Quick Ratio (x2), and Liquidity (x3) have a significant effect on (Earning Assets) Asset Quality (Y3).
Highlights
The insurance companies are heavily regulated in Egypt like elsewhere in terms of their portfolio and liquidity constraints which appear in ratios by the Financial Regulatory Authority in Egypt, especially most of these elements represent the working capital management
Ratnam Vijayakumaran and Sunitha Vijayakumaran (2017), this study revealed that there is a positive relationship between working capital management and corporate performance in Sri Lankan manufacturing firms, there is a negative relationship between cash conversion cycle on return on assets
Previous studies have focused on working capital management as applied on several economic sectors but insurance organizations have different nature of work from other economic sectors and so the variables for working capital management, Most of previous studies were applied to manufacturing sector As for Jakpar et al (2017), Hingurala Arachchi et al (2017), Amarjit Gill et al (2010) and Sugeewa Kadithuwakka (2015), those studies measured working capital management by cash conversion cycle, inventory turnover account payable and account receivable and some of them in cement industry like chuke Nwude et al(2020) but this study was applied to insurance industry which has a different nature so this study selected the measurement of working capital by current ratio quick ratio and liquidity in line with this study
Summary
The insurance companies are heavily regulated in Egypt like elsewhere in terms of their portfolio and liquidity constraints which appear in ratios by the Financial Regulatory Authority in Egypt, especially most of these elements represent the working capital management. Securities which represent 10% of paid capital for each one of them. This study sought to identify the relationship between working capital management measured by (Current Ratio, Quick Ratio and Liquidity) on Profitability measured by (Return on Equity and Return on Assets) and Asset Quality
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