Toward Efficient Management of Working Capital: The case of the Palestinian Exchange
Date
2012-02-28
Authors
Awad, Ibrahim M.
Al-Ewesat, Abdel-Rahman
Journal Title
Journal ISSN
Volume Title
Publisher
International Scientific Press
Abstract
The importance of this study comes from the truth that financial statements' users
need reliable, relevant, and useful financial information that should be reflected in
stock prices. However, this study aims at investigating current ratio, receivables
turnover, inventory turnover, and earnings per share for 18 companies listed on
PEX over the period from 2006 to 2011. Regression analysis and econometric
techniques of Unit root test, Co-integration, and Granger causality are applied.
The study outcomes indicate that stock prices of companies listed on PEX are
affected by working capital components. The results of traditional Granger
Causality reveal that there is no causal relationship between stock prices and
working capital components. In addition, there is a positive relationship between
CR and EPS and stock prices whereas there is a negative relationship between RT
and IT. The paper concludes that cash, times of receivables collection and
inventory turnover are necessary to be taken into account by both investors and
companies for improved the management of working capital at the PEX.
Description
Keywords
Causality , Dickey-fuller test , PEX , Stock prices , Working capital management