The effect of working capital management and credit management policy on Jordanian banks’ financial performance

Abstract

This study investigated the impact of Working Capital Management (WCM) and Credit Management Policy (CMP) on the Financial Performance (FP) of Jordanian banks (JB). The study data were obtained from 16 Jordanian banks listed on the Amman Stock Exchange (ASE) between 2017 and 2020. The study used panel data to investigate the relationship between the two independent variables, WCM and CMP, and the dependent variable FP; 64 financial reports to Jordanian banks were analyzed to measure this relationship. To test hypotheses, multiple regression was used. The study found a statistically significant relationship between WCM and FP, and the independent variable was able to explain 34.1% of the changes that occur in the dependent variable. In addition, the outcome approved that there is a statistically significant relationship between CMP and FP. Furthermore, CMP explained about 41.8% of changes in the dependent variable. The findings of this study indicate support for the banks’ performance; a bank may need to lengthen client credit terms, prolong the cash transfer cycle, and require a more extended payment period when judging on WCM. Acknowledgment The publication of this research has been supported by the Deanship of Scientific Research and Graduate Studies at Philadelphia University – Jordan.

The impact of working capital management on the profitability of listed halal food and beverage companies

“…(2017) discovered that APP has an adverse effect on the profitability of Vietnamese SMEs. The findings of other studies like Gołaś (2020) and Abdulnafea et al . (2022) suggested that APP significantly and negatively influenced firm profitability.…”

“…(2017), Gołaś (2020), Ibrahim and Isiaka (2021), Hofmann et al . (2022), Abdulnafea et al . (2022) and Urhoghide and Korolo (2022).…”

“…(2021) shows that accounts receivables management practices increased SMEs' financial performance. Abdulnafea et al . (2022) established a positive relationship between ACP and the profitability of Jordanian-listed banks.…”

Financial Inclusion and Financial Performance of Deposit Money Banks in Nigeria

“…The financial performance of a bank is expressed in quantitative values or measures expressed in monetary units such as the rate of return on equity and the rate of return on investment. Measuring financial performance results in the formulation of rules and mechanisms that help banks improve their strategies, as well as an assessment of achieving goals and rewarding managers (Abdulnafea et al, 2022). Financial performance is defined as the degree to which the bank's financial goals are achieved (Nguyen et al, 2021).…”

“…The financial performance during a certain period can be used to measure the bank's performance in comparison with the banks operating in the same sector (Ehiedu & Toria, 2022). Financial performance is the product of all the bank's operations and strategies, as the financial performance of banks provides information to develop their strategic plans (Abdulnafea et al, 2022). Kurawa and Shuaibu (2022) defined financial performance as a measure of expressing the general financial productivity of banks over a specific financial period.…”