IDEAS home Printed from https://ideas.repec.org/a/eme/ijmfpp/v10y2014i4p442-452.html
   My bibliography  Save this article

The impact of cash conversion cycle on firm profitability

Author

Listed:
  • Darush Yazdanfar
  • Peter Öhman

Abstract

Purpose - – The purpose of this paper is to seek to investigate the impact of cash conversion cycle (CCC) on performance (i.e. profitability) in Swedish small and medium-sized enterprises (SMEs) over the 2008-2011 period. Design/methodology/approach - – The study uses a seemingly unrelated regression (SUR) model to analyse cross-sectional panel data covering 13,797 SMEs operating in four industries. Findings - – The study provides empirical evidence that CCC significantly affects profitability. In addition, the firm-level control variables size, age, and industry affiliation significantly affect firm profitability. These findings imply that managers could increase firm profitability by improving their working capital management. Research limitations/implications - – The present study is limited to a sample of Swedish SMEs in four industries; further research could examine the generalizability of these findings to other countries and industries. Practical implications - – Improved working capital policy could improve firm profitability by reducing the firm's CCC, thereby creating additional firm value. In addition, the results can be used for other purposes, including monitoring of firms by auditors, debt holders, and other stakeholders. Originality/value - – The present study contributes to the literature by employing a SUR model to analyse a comprehensive cross-sectoral sample in a high-tax environment. To the authors’ knowledge, this is the first empirical study to address this issue in the Swedish context based on a large data set covering SMEs in various industries.

Suggested Citation

  • Darush Yazdanfar & Peter Öhman, 2014. "The impact of cash conversion cycle on firm profitability," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 10(4), pages 442-452, August.
    • Handle: RePEc:eme:ijmfpp:v:10:y:2014:i:4:p:442-452
    DOI: 10.1108/IJMF-12-2013-0137
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2013-0137/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2013-0137/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/IJMF-12-2013-0137?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Samina Riaz & Athar Iqbal & M Irfan Khan, 2019. "The Impact Of Ccc And Wc On The Profi Tability Of Kmi-30 Index," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 15(1), pages 84-94.
    2. Augustina Kurniasih & Heliantono, 2018. "Company’s Efficiency and Its Impact on Performance: A Study on State Owned Non-Financial Company Listed on Indonesian Stock Exchange," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 211-226.
    3. Shikha Bhatia & Aman Srivastava, 2016. "Working Capital Management and Firm Performance in Emerging Economies: Evidence from India," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 41(2), pages 71-87, May.
    4. Ivakina, A. & Zenkevich, N., 2018. "Working capital optimization under liquidity constraints in collaborative supply chains," Working Papers 15110, Graduate School of Management, St. Petersburg State University.
    5. repec:prg:jnlpep:v:preprint:id:681:p:1-17 is not listed on IDEAS
    6. Samina Riaz & Athar Iqbal & M Irfan Khan, 2019. "The Impact Of Ccc And Wc On The Profi Tability Of Kmi-30 Index," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 15(1), pages 15-17.
    7. Dalci, Ilhan & Ozyapici, Hasan, 2018. "Working capital management policy in health care: The effect of leverage," Health Policy, Elsevier, vol. 122(11), pages 1266-1272.
    8. Randa Mohammed Shams Addin Al-Mawsheki & Norzalina Binti Ahmad & Norhafiza Binti Nordin, 2019. "The Effects of Efficient Working Capital Management and Working Capital Policies on Firm Performance: Evidence from Malaysian Manufacturing Firms," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(3), pages 59-69, July.
    9. Burney, Robert B. & James, Hui Liang & Wang, Hongxia, 2021. "Working capital management and CEO age," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    10. Bilgehan TEKİN & Yusuf GÖR, 2022. "Cash conversion cycle and its relationship with profitability as a cash management tool in companies: An application on companies trading in Borsa Istanbul," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(632), A), pages 113-130, Autumn.
    11. Riaz, Samina & Iqbal, Athar & Khan, Muhammad Irfan, 2019. "The Impact of CCC and WC on The Profitability of KMI-30 INDEX," MPRA Paper 103036, University Library of Munich, Germany, revised 30 Dec 2019.
    12. Dina Korent, 2021. "Target adjustment model and new working capital management performance measure: Evidence from Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 39(1), pages 135-162.
    13. Zeidan, Rodrigo & Shapir, Offer Moshe, 2017. "Cash conversion cycle and value-enhancing operations: Theory and evidence for a free lunch," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 203-219.
    14. Ilhan Dalci & Cem Tanova & Hasan Ozyapici & Murad A. Bein, 2019. "The Moderating Impact of Firm Size on the Relationship between Working Capital Management and Profitability," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(3), pages 296-312.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:ijmfpp:v:10:y:2014:i:4:p:442-452. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.