The relationship between liquidity, profitability and the market value of companies: an applied study on clothing and leather manufacturing companies the textile is listed on the Amman Stock Exchange

Abstract

Maximizing the market value is a strategic goal that companies seek to achieve, and considering that this goal is related to two other fundamental goals: the goal of liquidity and the goal of profitability, the matter has become more complicated, as the inconsistency and lack of clarity represents the distinguishing feature of the network of relationships linking these three variables that cannot be isolated from each other Some, as investment decision makers are divided on the relationship between liquidity and profitability and the relationship of each with the aim of maximizing the market value of the company, and their division  was exacerbated after the results of financial research that dealt with the relationship of these variables to each other and became a result of that. their investment decisions became irrational.

Hence the main objective of this research was to determine precisely the nature of the relationships between liquidity and profitability and the market value of the company, and to know whether liquidity directly affects the market value of the company, or whether it needs profitability as a medium to exercise this effect, or whether liquidity can exert its influence on value Market the company directly and indirectly through profitability at the same time. To achieve this goal, a non-random (intentional) sample was studied that included four companies for the clothing, leather and textile industries listed on the Amman Stock Exchange for the period between the first quarter of 2000 and the fourth quarter of 2016. The study relied on five indicators to measure liquidity and four indicators to measure profitability and Tobin's ratio q To

measure the market value of the company.

 The results of the study showed a difference in the relationships between the studied variables according to the different indicators used to measure them, as liquidity appeared measured by the adjusted trading rate, which affects - unlike the rest of the liquidity indicators - in a positive, direct, and significant indication of the market value of the company, and the profitability measured by the rate of return on property rights affects - other than Other indicators of profitability - positively and significantly indicative of the company's market value. The results also showed that the effect of liquidity on the market value of the company decreased by introducing profitability to the regression equation, which confirmed the mediating role of profitability between liquidity and the market value of the company.