چرخه تبدیل نقدی و عملکرد شرکت: شواهد جهانی Cash conversion cycle and corporate performance: Global evidence

1. Introduction Finance theory discussion is generally related to one of the following categories: capital budgeting, capital structure, dividend policy, or working capital management. Although working capital management is vital because of its impact on a firm’s profitability and risk, and consequently its value (Smith, 1980), it has received less attention than the other aforementioned categories. Jose, Lancaster, and Stevens (1996) indicate that the day-to-day management of a firm’s short-term assets and liabilities plays a crucial role in its success. Therefore, although working capital management is short-term financial management, it often becomes a genuine source of profit. Kroes and Manikas (2014) suggest that cash flow management is a critical element of a firm’s operational strategies. Working capital investment involves a trade-off between profitability and risk, and the balance between both factors is essential. Firms may have an optimal level of working capital that maximizes their value (Deloof, 2003; Howorth and Westhead, 2003). Decisions that can increase profitability can also increase risk; conversely, decisions that focus on risk reduction may reduce potential profitability (Filbeck and Krueger, 2005; García-Teruel and Martínez-Solano, 2007). Related literature suggests that an aggressive working capital management policy can enhance a firm’s performance. If the accounts receivable collection period is too long, the firm may face the risk of liquidity and payment recovery. Similarly, the firm may lose its inventory-carrying cost if the inventory conversion period is excessively increased. Increasing the payable deferral period may result in reduced payment stress. In addition, maintaining a high level of working capital leads to an opportunity cost if the firm relinquishes more profitable investments. Therefore, several studies have indicated that a reduced cash conversion cycle (CCC) can improve operating performance. For example, Hager (1976), Kamath (1989), Jose et al.