Does Cash Conversion Cycle Affect Corporate Performance? Evidence from Manufacturing Sector of Pakistan

Abstract

While devising working capital policy, cash conversion cycle (CCC) is central to management deliberation particularly in manufacturing concern. Because CCC impact firm’s profitability and liquidity. In the past, business literature has documented ample evidences related to cash conversion cycle and firm’s profitability but the results are mixed and not definite to generalize it into different business settings and environment. the purpose of this study is to investigate the phenomena of cash conversion cycle in relation to firm’s probability of manufacturing sector of Pakistan. The study used Causal co relational research design for 56 manufacturing firms listed at Pakistan stock exchange covering a period from 2014-2017. Using descriptive statistics, correlation and regression analysis, it is concluded that longer the duration of turnover in days of the cash conversion cycle, less capital will be employed in short-term assets and ultimately capital investment will be more in hand which will lead towards the firm’s higher level of profitability. The findings of this study will provide useful intuition and insights to policy makers, debt holders, managers, owners and academic researchers. This study support the findings of Lyroudi and Lazaridis (2000),Gill et al. (2010),Sharma and Kumar (2011) and Abuzayed (2012).

Keywords: Cash conversion cycle, Return on assets, Working capital management.