The Relationship among Working Capital Efficiency, Financial Leverage, and Firm Performance: An Empirical Analysis of the Healthcare Firms Listed in Saudi Bourse

Abstract

Financial resources are essential for business growth and attainment of competitive advantage. The effective allocation and usage of financial resources play a decisive role in ensuring businesses' long-term survival and competitive advantage across the world in all industries. Healthcare sector is of core importance due to its dynamic and ever evolving character. Like every other country, KSA puts a lot of attention to the healthcare industry and effective financial management has gained importance. The study aims to check the association among financial leverage, working capital efficiency and performance of the firm. Six mega healthcare firms that are listed the Saudi Stock Exchange (Tadawul) were selected for sampling from 2014-2022. The results of regression and correlations tests show a goodness of fit or R2 shows 40%and 52% effect of WC on returns and equity of the companies, whereas coefficient shows 0.00039 and 0.00073 negative impact on assets and equity returns. The current research results highlighted a negative association among WCM and companies returns.  The study further concluded that FL has a positive effect on CCC, implying that increased financial leverage (FL) and working capital management (WCM) factors had negatively influenced both returns on assets and equity. Effectively managing working capital contributed to improved financial performance. Therefore, findings and results suggested that healthcare organizations better use the best working capital management practices to reach up to optimized performance and returns.