Does the Cash Conversion Cycle Affect Firm Profitability? Some Empirical Evidence from Listed Firms in North Macedonia
Open accessAbstract
This study aims to investigate the potential relationship between the cash conversion cycle (CCC) and firm profitability for the period from 2011 to 2019. To do this, a fixed effects panel regression model is applied to a sample of firms listed on the Macedonian Stock Exchange. Firm profitability is measured by the return on assets (ROA) ratio, while the liability ratio, firm size, current ratio, acid test and liquidity ratio are used as control variables. Our main finding is a decreasing and convex relationship between cash conversion cycle and profitability. In terms of working capital management policy, this implies that firms with a shorter cash conversion cycle perform better than others, since financial managers repay suppliers and reduce investments in working capital.
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Deari and Palomba observed a non-significant relationship between CCC components and profitability.
“Deari and Palomba [10] varied from that of other scholars, as they observed non-significant relationship between CCC components and profitability.”
From Exploring the Causal Effect of Cash Conversion Cycle Signals on Profitability of Tanzanian Manufacturing Firms (2024) · cites this paper as Deari and Palomba [10]
The reviewed literature presents mixed findings regarding the correlation of CCC components with profitability, showing either positive or negative relationships.
“Researches present mixed findings regarding the correlation of CCC components with profitability. The reviewed literature showed either positive relationship or negative relationship.”
From Exploring the Causal Effect of Cash Conversion Cycle Signals on Profitability of Tanzanian Manufacturing Firms (2024) · cites this paper as Deari and Palomba [10]
Cites
Does Working Capital Management Affect Profitability of Belgian Firms?
Deloof, M. (2003) · Journal of Business Finance & Accounting · doi:10.1111/1468-5957.00008 · Cited by 1,849 · see citing works
Does working capital management affect firm profitability? Evidence from European Union countries
Deari, F., Kukeli, A., Barbuta-Misu, N., & Virlanuta, F. O. (2024) · Journal of Economic and Administrative Sciences · doi:10.1108/jeas-11-2021-0222 · Cited by 23 · see citing works
Self-citationUmar, U. H., & Al-Faryan, M. A. S. (2024) · Managerial Finance · doi:10.1108/mf-12-2022-0606 · Cited by 22 · see citing works
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Tago, G., & Sumawe, S. (2024) · International Journal of Economics, Finance and Management Sciences · doi:10.11648/j.ijefm.20241205.19
- Authors
- Deari, F., & Palomba, G.
- Affiliations
- South East European University (MK)
- Marche Polytechnic University (IT)
- Corresponding author
- Deari, Fitim
- Venue
- Zagreb International Review of Economics and Business
- Publisher
- Walter de Gruyter GmbH
- Published
- 2024-05-01
- Volume
- 27
- Issue
- 1
- Pages
- 63-77
- ISSN
- 1331-5609 (ISSN-L)
- 1849-1162
- OpenAlex
- W4399307228
- Cited by
- 5
- References
- 3
- Citations by year
- 2026: 3 · 2025: 1 · 2024: 1
- FWCI
- 4.98
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Zagreb international review of economics and business/Zagreb international review of economics & business (publishedVersion, cc-by-nc-nd)
- University of Zagreb University Computing Centre (SRCE) (submittedVersion, cc-by)
- Università Politecnica delle Marche (Università Politecnica delle Marche) (submittedVersion, cc-by-nc-nd)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
- Social Sciences › Business, Management and Accounting › Management Information Systems › Supply Chain and Inventory Management
- Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
- Keywords
- cash conversion cycle, firm profitability, working capital management, return on assets, listed companies, liquidity ratios, firm size
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