Determinants of Working Capital Management of Real Estate Sector Evidence from Saudi Arabia

Working capital management refers to management of short-term capitals of the company at which includes the capital that companies are using in their daily operations. Moreover, management plays a vital role in maximization of shareholders wealth accordingly working capital management involves to major decisions regarding investment policy. To investigate the determinants of WCM, the panel data methodology has been employed that’s the sample of nine real estate firms that are listed in Saudi stock exchange (Tadawul) over six years from 2010 to 2015 are considered. OLS methodology implied to study the variation of the explanatory variables on the explained variable. The dependent variable of this study is cash conversion cycle which represents working capital management and the explanatory variables are profitability, size, sales growth, free cash flow and leverage. Findings reports a significant and negative association between profitability, size and leverage, and cash conversion cycle however the effect of sales growth and free cash flow on cash conversion cycle found to be positive but significant for sales growth and insignificant for free cash flow. Keywords: Working capital management, real estate firms, Saudi stock exchange (Tadawul). OLS.