The Moderating Role of Liquidity in the Relationship between the Expenditures and Financial Performance of SMEs: Evidence from Jordan

Abstract

The current paper aims to investigate the moderating role of liquidity in the relationship between accounting and advertising expenditures and the financial performance of small and medium enterprises (SMEs) in Jordan. Furthermore, the present paper highlights the importance of managing expenditures and improving financial performance. Since the performance of Jordanian SMEs is extremely critical, furthermore, the present paper explores the possibility of empowering these businesses in order to achieve profitability. This paper is based on descriptive statistics, regression, and correlation analysis in order to analyze the data, collecting secondary data from 200 SMEs. The results demonstrate that accounting expenditures are key factors for financial performance, especially in SMEs. Moreover, SMEs are more sensitive to liquidity challenges, which significantly impact their short-term expenditure and consequently influence their financial performance. It is evident that accounting expenditures moderated by liquidity have a positive effect on the financial performance of SMEs. However, our findings indicate a negative effect regarding the relationship between advertising expenditures and financial performance. According to the results of this study, regulators may offer new regulations and legislation in the future to the Ministry of Finance and the Amman Stock Exchange.

The Moderating Effect of Liquidity on the Relationship between Expenditure and Financial Performance of SMEs in Indonesia

“…Furthermore, this study looks into how liquidity influences the connections between financial performance, advertising, and accounting expenses. This contribution is particularly relevant during the COVID-19 pandemic, which has the potential to impact these relationships during this critical period (Airout et al, 2023).This study continues previous research by analyzing the financial performance of SMEs in Indonesia, specifically those included in the pefindo25 index. Based on data from BPS and the Ministry of SMEs, household consumption contributed 51.65%, while SMEs contributed 61% to GDP growth.…”

“…Accounting is essential for monitoring costs and income, making sure that regulations are followed, and supplying statistical information for company policy formulation. Furthermore, enhanced company performance results from seamless synchronization of all processes (Airout et al, 2023). In their research, Kamau (2015) describes a significant relationship between accounting expenditure and business performance.…”

“…Furthermore, this study looks into how liquidity influences the connections between financial performance, advertising, and accounting expenses. This contribution is particularly relevant during the COVID-19 pandemic, which has the potential to impact these relationships during this critical period (Airout et al, 2023).…”

How Critical was the COVID-19 Pandemic? Exploring The Effects on Small Business Finance

“…It hints at how efficiently assets can be converted to meet the financial needs of the entity. According to Airout et al (2023), small businesses are more susceptible to liquidity challenges when compared to larger businesses. This means that events such as the COVID-19 pandemic can have a significant impact on the liquidity management of small businesses and, by extension, their survival and growth.…”

Determinants of Firm Profitability: Empirical Evidence From Jordan’s Service Sector

“…Profitability is less developed in Jordan. There have been few studies that have investigated factors that affect it (Airout et al, 2023). Gharaibeh and Bani Khaled (2020) examined factors influencing profitability for 46 listed service companies in Jordan from 2014 to 2018.…”