Testing the relationship between working capital
management, profitability and operational
efficiency using Granger causality
An applied study of a sample of companies in the services and industry sectors listed in
the Iraqi Stock Exchange
Message submitted to
The Council of the College of Administration and Economics at the University of
Karbala
It is part of the requirements for obtaining a Master of Science degree in Banking and
Finance
Submitted by the student
Hali Hamdi Abdul Hassan Al-Khafaji
Supervised by
M.D. Zainab Makki Al-Bina

This study aims to identify the causal relationship between working capital
management, profitability and operational efficiency, and to know the reality of
working capital management in some service and industrial companies, and to
come up with results and recommendations that help financial management in it
to realize the nature of the relationship between the components of working
capital management and both profitability and efficiency. Operational, and to
measure and analyze the causal relationship (type and direction of the
relationship) between working capital management, profitability and operational
efficiency in service and industrial companies, the study sample.
The population of this study was represented by the service and industrial
companies listed in the Iraqi Securities Commission, while the study sample
was represented by four companies listed for each sector. These sectors were
chosen for their great importance and because they provide the appropriate
environment for measuring working capital, profitability and operational
efficiency and studying the relationship between them and whether this
relationship is causal or not.
As for the duration of the study, it was eleven years for the period (2008-2019),
according to the annual reports available for the study sample companies.
The analytical method was relied upon because it was more appropriate to
the nature and field of the study, and a number of the program was used to
analyze the causal relationship between the variables and test the hypotheses
through the (Granger) test, using the Excel program and the ready-made
statistical program (Eviews).
The study reached several conclusions, the most important of which is the
absence of a causal relationship between working capital management (the
independent variable) and profitability (the dependent variable) and between
working capital management (the independent variable) and operational
efficiency (the dependent variable), and in light of these conclusions, several
conclusions were reached. Recommendations, the most important of which are
the necessity of the study sample companies’ interest in managing working
capital, profitability and operational efficiency to ensure the achievement of the
company’s main objectives (profitability, liquidity, and safety).