| dc.description.abstract | This thesis investigates the impact of the Cash Conversion Cycle (CCC) on profitability, debt, and cash holdings among US firms from 2002 to 2022, utilizing regression models and data from the CRSP/Compustat Merged Database. Contrary to prior research, our findings reveal no robust evidence that a shorter CCC increases profitability. Additionally, we find no consistent support for the pecking order theory or the static trade-off theory of cash holdings in the context of working capital management.
Our results underscore the complexity and variability of CCC, suggesting that the benefits of efficient working capital management are not as consistent as previously posited in the literature. The study identifies that profitability and CCC might influence each other simultaneously, which complicates the interpretation of their direct relationship. For instance, while more profitable firms can afford to maintain higher inventory levels, less profitable firms might manage their inventory more efficiently due to liquidity constraints.
In terms of financing, our study does not find consistent evidence that firms with a longer CCC rely more on debt, nor do we find evidence that they hold more cash. Future studies should consider more industry-specific analyses and case studies to better understand the nuances of working capital management and its financial implications.
In conclusion, this thesis contributes to the body of knowledge on working capital management by providing a detailed examination of the CCC and its impact on key financial metrics. Our findings suggest that the relationship between CCC and profitability is more complex than previously thought, and efficient working capital management should be tailored to the specific context of each firm and industry. | en_US |
