The moderating role of interest rates on the relationship between working capital management and firm value: Evidence from EGX | ||
| Academic Journal of Social Sciences | ||
| Articles in Press, Accepted Manuscript, Available Online from 23 November 2025 | ||
| Document Type: Original Article | ||
| DOI: 10.21608/ajsc.2025.435687.1009 | ||
| Authors | ||
| Osama Wagdi* 1; Atef Fathi2; Samah Nousir3; Hassan Hafez4 | ||
| 1Visiting Associate Professor of Business Administration, Faculty of Management, Economics and Business Technology, Egyptian Russian University (ERU), Egypt | ||
| 2Thebes Higher Institute of Management and Information Technology, Egypt. | ||
| 3Department of Economics, Higher Future Institute for Specialized Technological Studies, Egypt | ||
| 4May University in Cairo (MUC), Egypt. | ||
| Abstract | ||
| Abstract: This study examines how interest rates moderate the relationship between working capital management (WCM) and firm value for non-financial firms listed on the Egyptian Stock Exchange (EGX) during 2015-2024. Using fixed-effects regression models on a balanced panel of 270 firm-year observations, we analyze how Egypt's volatile macroeconomic environment shapes the value implications of WCM decisions. Our findings confirm a significant negative relationship between the Cash Conversion Cycle (CCC) and firm value (measured by Tobin's Q), indicating that efficient WCM enhances shareholder value. Crucially, we demonstrate that this relationship is significantly moderated by interest rates: the value-eroding effect of inefficient working capital management intensifies under high-interest-rate conditions. These results remain robust across multiple specifications, including GMM estimation to address endogeneity concerns. Theoretically, this study integrates macroeconomic dynamics into corporate financial policy analysis, showing that the strategic importance of WCM is context-dependent. Practically, our findings highlight the need for firms in emerging markets to treat WCM as a dynamic strategic lever, particularly during monetary tightening cycles. | ||
| Keywords | ||
| Working capital management; firm value; interest rates; cash conversion cycle; emerging markets | ||
|
Statistics Article View: 5 |
||
