Impact of Corporate Governance on the Efficiency of Working Capital Management of Manufacturing Firms Listed in Amman Stock Exchange

Abstract

The aim of this study is to examine the impact of corporate governance on the efficiency of working capital management. The sample included 49 manufacturing companies listed in Amman Stock Exchange (ASE) for the period (2011-2013). Corporate governance was measured by: board size, board independence, CEO duality and audit committee. On the other hand, the working capital management efficiency was measured by: average collection period and cash conversion cycle. In addition, firm size, sales growth, debt ratio and return on assets were used as control variables. Data related to the variables examined in this study was collected from the companies’ annual reports and from the website of ASE. Ordinary Least Square (OLS) method was used to conduct this study. The results showed a highly significant positive relationship between CEO duality and average collection period, which means that the separation between CEO and the chairman of the board increases the efficiency of account receivable. The study recommends to have legislations in place in order to ensure complete compliance of all companies with corporate governance initiatives. It also recommends paying more attention when forming audit committees to have members with relevant experience in finance and accounting and conducting more studies on the subject that take into consideration new variables which were not examined in the current study