Managing working capital for profitability; Experience in the Saudi SME sector
Keywords:
Assertive investment, inventory conversion period, cash conversion period, market value, SME.
Abstract
This study is an attempt to examine the relationship between Assertive investment, inventory conversion period, cash conversion period, firm performance, and market value. Moreover, this study also examined the mediating role of firm performance. The data for this research was collected from the employees working in the SME sector of KSA. A self-administrative survey was conducted to collect the data. After three reminders, 68.4% of questionnaires were returned, and 66.7% were found to be duly completed and used in this research. The data was gleaned from these questionnaires and was later analyzed using SPSS 25 and Smart PLS 3. The study’s results revealed that except for the inventory conversion period, all other chosen parameters affect the market value of the Saudi SME sector. At the same time, the rest of the direct effects are confirmed. On the other hand, the mediating role of firm performance is confirmed between CCP, ICP, and MV. The findings of this study are helpful for the policymakers of the SME sector in KSA.
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References
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Ganiyu, A. B., Henry, A. W., & Adekunle, A. M. (2019). An assessment of just in time system on the financial performance of manufacturing firms in Nigeria. Journal of Accounting and Taxation, 11(7), 111-119.
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Ondimu, J., Rotich, G., & Kipkirui, P. (2018). Effect of inventory management on financial performance of listed manufacturing firms in Kenya. The Strategic Journal of Business & Change Management, 5(2), 1615-1622.
Pearsall, M. J., & Ellis, A. P. (2006). The effects of critical team member assertiveness on team performance and satisfaction. Journal of Management, 32(4), 575-594.
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Purwanto, A., & Sudargini, Y. (2021). Partial Least Squares Structural Squation Modeling (PLS-SEM) Analysis for Social and Management Research: A Literature Review. Journal of Industrial Engineering & Management Research, 2(4), 114-123.
Rehman, W. U., Asghar, N., & Ahmad, K. (2015). Impact of km practices on firms'performance: a mediating role of business process capability and organizational learning. Pakistan Economic and Social Review, 47-80.
Romașcanu, M. C., & stănescu, D. F. (2020). the mediator role of transformational leadership between assertiveness and job performance. Strategica, 240.
Sarstedt, M., Hair, J.F., Ringle, C.M., Thiele, K.O., & Gudergan, S. P. (2016). Estimation issues with PLS and CBSEM: Where the bias lies! Journal of Business Research, 69(10), 3998-4010.
Sathyamoorthi, C., Mbekomize, C. J., Mapharing, M., & Selinkie, P. (2018). The impact of corporate governance on working capital management efficiency: Evidence from the listed companies in the consumer services sector in Botswana. International Journal of Economics and Finance, 10(2), 135-149.
Shin, H.-H., & Soenen, H. L. (1998). Efficiency of working capital and corporate profitability, Journal: Practice and Financial Education, 8(2), pp. 37,45
Sukesti, F., Ghozali, I., Fuad, F., Almasyhari, A.K., & Nurcahyono, N. (2021). Factors affecting the stock price: The role of firm performance. The Journal of Asian Finance, Economics, and Business, 8(2), 165-173.
Sulong, S., Saleem, Q., & Ahmed, Z. (2018). The role of stock market development in influencing the firms performance: A study based on Pakistan stock market. International Journal of Economics and Finance, 10(12), 104.
Taouab, O., & Issor, Z. (2019). Firm performance: Definition and measurement models. European Scientific Journal, 15(1), 93-106.
Van Weele, M., van Rijnsoever, F. J., & Nauta, F. (2017). You can't always get what you want: How entrepreneur's perceived resource needs affect the incubator's assertiveness. Technovation, 59, 18-33.
Vejseli, S., & Rossmann, A. (2017). The impact of IT governance on firm performance a literature review, PACIS 2017 Proceedings, 41. https://aisel.aisnet.org/pacis2017/41.
Yasir, M., Majid, A., & Yousaf, Z. (2014). Cash conversion cycle and its impact upon firm performance: An evidence from cement industry of Pakistan. Global Business and Management Research, 6(2), 139.
Yazdanfar, D., & Öhman, P. (2014). The impact of cash conversion cycle on firm profitability: An empirical study based on Swedish data. International Journal of Managerial Finance, 10(4).
Zakari, M., & Saidu, S. (2016). The impact of cash conversion cycle on firm profitability: Evidence from Nigerian listed telecommunication companies. Journal of Finance and Accounting, 4(6), 342-350.
Chin, W. W. (1998). The partial least squares approach to structural equation modeling. Modern methods for business research, 295(2), 295-336.
Deswanto, R. B., & Siregar, S. V. (2018). The associations between environmental disclosures with financial performance, environmental performance, and firm value. Social Responsibility Journal, 14(1).
Doğan, M., & Kevser, M. (2020). The Determinants of Cash Conversion Cycle and Firm Performance: An Empirical Research for Borsa Istanbul Turkey. Management and Economics Review, 5(2), 197-206.
Farooq, U., Maqbool, M. Q., Waris, M., & Mahmood, R. (2016). Liquidity risk, performance and working capital relationship of cash conversion cycle: an empirical study of the firms in Pakistan. International Journal of Information Research and Review, 3(3), 1946-1951.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of marketing research, 18(1), 39-50.
Ganiyu, A. B., Henry, A. W., & Adekunle, A. M. (2019). An assessment of just in time system on the financial performance of manufacturing firms in Nigeria. Journal of Accounting and Taxation, 11(7), 111-119.
Gefen, D., Straub, D., & Boudreau, M.-C. (2000). Structural equation modeling and regression: Guidelines for research practice. Communications of the association for information systems, 4(1), 7.
Hamdan, A. (2018). Intellectual capital and firm performance: Differentiating between accounting-based and market-based performance. International Journal of Islamic and Middle Eastern Finance and Management, 11(1).
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the academy of marketing science, 43(1), 115-135.
Henseler, J., Ringle, C. M., & Sinkovics, R. R. (2009). The use of partial least squares path modeling in international marketing. In New challenges to international marketing: Emerald Group Publishing Limited.
Jihadi, M., Vilantika, E., Hashemi, S. M., Arifin, Z., Bachtiar, Y., & Sholichah, F. (2021). The effect of liquidity, leverage, and profitability on firm value: Empirical evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 8(3), 423-431.
Kangogo, C. C., & Irungu, A. M. (2020). Inventory Conversion Period and Financial Performance of Selected Firms Listed at Nairobi Securities Exchange. Journal of Finance and Accounting, 4(5), 55-76.
Kline, R. B. (2011). Principles and practice of structural equation modeling (3. Baskı). New York, NY: Guilford.
Koji, K., Adhikary, B. K., & Tram, L. (2020). Corporate governance and firm performance: A comparative analysis between listed family and non-family firms in Japan. Journal of Risk and Financial Management, 13(9), 215.
Moneva, J. C., & Bolos, N. G. (2020). Assertiveness and performance tasks. International Journal of Social Science Research, 8(2), 143-155.
Ngatemin, M., Maksum, A., Erlina, M., & Sirojuzilam, M. (2018). Antecedent Capital Structure and Its Effect on Firm Value: Case Study on Tourism Industry Sector Listed in Indonesia Stock Exchange. Paper presented at the 1st Economics and Business International Conference 2017 (EBIC 2017). (pp. 235-240). Atlantis Press.
Obeidat, S. M., Al Bakri, A. A., & Elbanna, S. (2020). Leveraging “green” human resource practices to enable environmental and organizational performance: Evidence from the Qatari oil and gas industry. Journal of Business Ethics, 164(2), 371-388.
Okechukwu, W. (2017). Influence of training and development, employee performance on job satisfaction among the staff. Journal of Technology Management and Business, 4(1).
Ondimu, J., Rotich, G., & Kipkirui, P. (2018). Effect of inventory management on financial performance of listed manufacturing firms in Kenya. The Strategic Journal of Business & Change Management, 5(2), 1615-1622.
Pearsall, M. J., & Ellis, A. P. (2006). The effects of critical team member assertiveness on team performance and satisfaction. Journal of Management, 32(4), 575-594.
Phan, H.-T.-P., De Luca, F., & Iaia, L. (2020). The “Walk” towards the UN Sustainable Development Goals: Does Mandated “Talk” through NonFinancial Disclosure Affect Companies’ Financial Performance? Sustainability, 12(6), 2324.
Purwanto, A., & Sudargini, Y. (2021). Partial Least Squares Structural Squation Modeling (PLS-SEM) Analysis for Social and Management Research: A Literature Review. Journal of Industrial Engineering & Management Research, 2(4), 114-123.
Rehman, W. U., Asghar, N., & Ahmad, K. (2015). Impact of km practices on firms'performance: a mediating role of business process capability and organizational learning. Pakistan Economic and Social Review, 47-80.
Romașcanu, M. C., & stănescu, D. F. (2020). the mediator role of transformational leadership between assertiveness and job performance. Strategica, 240.
Sarstedt, M., Hair, J.F., Ringle, C.M., Thiele, K.O., & Gudergan, S. P. (2016). Estimation issues with PLS and CBSEM: Where the bias lies! Journal of Business Research, 69(10), 3998-4010.
Sathyamoorthi, C., Mbekomize, C. J., Mapharing, M., & Selinkie, P. (2018). The impact of corporate governance on working capital management efficiency: Evidence from the listed companies in the consumer services sector in Botswana. International Journal of Economics and Finance, 10(2), 135-149.
Shin, H.-H., & Soenen, H. L. (1998). Efficiency of working capital and corporate profitability, Journal: Practice and Financial Education, 8(2), pp. 37,45
Sukesti, F., Ghozali, I., Fuad, F., Almasyhari, A.K., & Nurcahyono, N. (2021). Factors affecting the stock price: The role of firm performance. The Journal of Asian Finance, Economics, and Business, 8(2), 165-173.
Sulong, S., Saleem, Q., & Ahmed, Z. (2018). The role of stock market development in influencing the firms performance: A study based on Pakistan stock market. International Journal of Economics and Finance, 10(12), 104.
Taouab, O., & Issor, Z. (2019). Firm performance: Definition and measurement models. European Scientific Journal, 15(1), 93-106.
Van Weele, M., van Rijnsoever, F. J., & Nauta, F. (2017). You can't always get what you want: How entrepreneur's perceived resource needs affect the incubator's assertiveness. Technovation, 59, 18-33.
Vejseli, S., & Rossmann, A. (2017). The impact of IT governance on firm performance a literature review, PACIS 2017 Proceedings, 41. https://aisel.aisnet.org/pacis2017/41.
Yasir, M., Majid, A., & Yousaf, Z. (2014). Cash conversion cycle and its impact upon firm performance: An evidence from cement industry of Pakistan. Global Business and Management Research, 6(2), 139.
Yazdanfar, D., & Öhman, P. (2014). The impact of cash conversion cycle on firm profitability: An empirical study based on Swedish data. International Journal of Managerial Finance, 10(4).
Zakari, M., & Saidu, S. (2016). The impact of cash conversion cycle on firm profitability: Evidence from Nigerian listed telecommunication companies. Journal of Finance and Accounting, 4(6), 342-350.
Published
2022-10-10
How to Cite
Tariq, S. M., & Albogami, H. E. (2022). Managing working capital for profitability; Experience in the Saudi SME sector. Amazonia Investiga, 11(55), 209-219. https://doi.org/10.34069/AI/2022.55.07.22
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