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

  • Received October 20, 2021;
    Accepted December 17, 2021;
    Published January 5, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.16(4).2021.19
  • Article Info
    Volume 16 2021 , Issue #4, pp. 229-239
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This work is licensed under a Creative Commons Attribution 4.0 International License

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.

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    • Table 1. Method of measuring the variables
    • Table 2. Jordanian banks
    • Table 3. Descriptive statistics
    • Table 4. Multiple regression test for working capital management
    • Table 5. Multiple regressions to test credit management policy
    • Conceptualization
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Data curation
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Formal Analysis
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Investigation
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Methodology
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Project administration
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Validation
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Writing – original draft
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh
    • Writing – review & editing
      Abdulnafea AL-Zararee, Nashat Ali Almasria, Qasim Ahmad Alawaqleh