Corporate returns and cash conversion cycles


This study examines the relationship between profitability measures and management of ongoing liquidity needs for a large cross-section of firms over a twenty-year period. Long-run equilibrium relationships between the cash conversion cycle, a measure of ongoing liquidity management, and alternative measures of profitability are tested using both nonparametric and multiple regression analysis. Industry and size differences are controlled. While there are exceptions to the general finding for specific firms and for specific industries, the paper offers strong evidence that aggressive working-capital policies enhance profitability.

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Correspondence to Manuel L. Jose.

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Jose, M.L., Lancaster, C. & Stevens, J.L. Corporate returns and cash conversion cycles. J Econ Finan 20, 33 (1996).

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  • Liquidity Management
  • Profitability Measure
  • Capital Management
  • Financial Service Industry
  • Cash Management