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The Moderating Impact of Firm Size on the Relationship between Working Capital Management and Profitability

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Listed:
  • Ilhan Dalci
  • Cem Tanova
  • Hasan Ozyapici
  • Murad A. Bein

Abstract

This study investigates whether firm size moderates the relationship between cash conversion cycle and profitability over 8-year period for 285 German non-financial firms. The moderated regression results reveal that the relationship between cash conversion cycle and profitability is moderated by firm size. As the firm size gets smaller and the cash conversion cycle gets longer, the returns on assets decreases. When the firm size gets bigger and the cash conversion cycle gets longer, on the other hand, the returns on assets increases. In this context, reducing the length of cash conversion cycle has a positive impact on profitability for only small and medium-sized firms. Accordingly, this study concludes that small and also medium-sized firms, contrary to big firms, should reduce the length of cash conversion cycle in order to increase profitability.

Suggested Citation

  • 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.
    • Handle: RePEc:prg:jnlpep:v:2019:y:2019:i:3:id:681:p:296-312
    DOI: 10.18267/j.pep.681
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    Cited by:

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    More about this item

    Keywords

    cash conversion cycle; firm size; small firms; profitability; working capital management;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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