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Net Working Capital and Firm Growth

Alaa Adden A. Abuhommous
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Alaa Adden A. Abuhommous: Department of Banking and Finance, School of Business, Mutah University, Al-Karak, Jordan

International Review of Management and Marketing, 2017, vol. 7, issue 4, 131-137

Abstract: 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.

Keywords: Finance; Investment; Firm Growth; Net Working Capital (search for similar items in EconPapers)
JEL-codes: L25 L11 (search for similar items in EconPapers)
Date: 2017
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