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.