Working capital management and Firm performance : In Swedish listed firms

Abstract: Purpose: Present paper aims to help managers in their working capital management decisions by answering: Does the cash conversion cycle and its individual components affect firm performance of Swedish listed firms? Design/Methodology/approach: Present paper applies the cash conversion cycle and its individual components as working capital management measures to investigate the impact of working capital management on market value and profitability. During the period 2012-2015, 707 observations are made. These observations are based on non-financial firms listed on Stockholm OMX, operating in seven different industries. Findings: Present study finds no statistically significant impact of the cumulative cash conversion cycle on neither market value nor profitability. Present study further find no support for an impact of the separate cash conversion cycle components on market value or profitability. Originality/value: Present paper contributes to the research area of working capital management by studying the impact of the cash conversion cycle and its individual components on both market value and profitability in Swedish listed firms. The paper provides insights applicable for managerial decision-making. Keywords: Corporate finance, Working capital management, Cash conversion cycle, Firm performance, Sweden.