Impact of Working Capital Management on Market Value in Conventional Banks: Evidence from Damascus Securities Exchange

Abstract

This study investigates the impact of working capital management – WCM on equity market value for a sample of 11 conventional banks listed on the Damascus Securities Exchange (2009–2023). The methodology was applied to panel data for 165 observations using Pooled OLS enhanced by robust Arellano and Driscoll–Kraay standard errors to control for autocorrelation and cross-sectional dependence.

Results reveal a pricing mechanism that rewarded conservative WCM policies; the Cash Holding Ratio (CHR) showed a positive impact on market value at the 5% significance level, while excessive credit expansion (LDR) appeared with a significant negative effect. Bank size growth  also emerged as a structural driver of valuation. Conversely, the Net Working Capital to Total Assets ratio (NWCTA) showed a significant positive effect consistent with robustness tests, but its statistical significance was sensitive to the error correction method. However, the inclusion of time-fixed effects indicated that the ability of working capital management indicators to explain variance declined against the dominance of common systemic shocks during years of severe instability.