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Does the Cash Conversion Cycle Affect Firm Profitability? Some Empirical Evidence from Listed Firms in North Macedonia

Author

Listed:
  • Deari Fitim

    (Faculty of Business and Economics, South East European University, Tetovo, North Macedonia)

  • Palomba Giulio

    (Dipartimento di Scienze Economiche e Sociali, Università Politecnica delle Marche, Ancona, Italy.)

Abstract

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.

Suggested Citation

  • Deari Fitim & Palomba Giulio, 2024. "Does the Cash Conversion Cycle Affect Firm Profitability? Some Empirical Evidence from Listed Firms in North Macedonia," Zagreb International Review of Economics and Business, Sciendo, vol. 27(1), pages 63-77.
    • Handle: RePEc:vrs:zirebs:v:27:y:2024:i:1:p:63-77:n:1003
    DOI: 10.2478/zireb-2024-0003
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    More about this item

    Keywords

    cash conversion cycle; profitability; fixed-effects panel estimation;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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