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Cash Conversion Cycle Theory and Corporate Profitability: Evidence from Non-Financial Firms Listed on the Johannesburg Stock Exchange

The Journal of Accounting and Management

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Title Cash Conversion Cycle Theory and Corporate Profitability: Evidence from Non-Financial Firms Listed on the Johannesburg Stock Exchange
 
Creator Oseifuah, Emmanuel Kojo; University of Venda
Gyekye, Agyapong; University of Venda
 
Subject Cash Convesrion Cycle; Inventory Conversion Period; Receivables Conversion Period; Payables Conversion Period; Profitability; Johannesburg Stock Exchange;
 
Description This study usesRichards and Laughlin’s (1980) Cash Conversion Cycle theory to investigate theimpact of working capital management efficiency and its separate components onthe profitability of a sample of 75 non-financial firms listed on theJohannesburg Stock Exchange (JSE). Panel data regression methodology was usedto analyse financial data obtained from I-Net Bridge and BF McGregor for the 10year period, 2003 to 2012 to determine the nexus between working capitalmanagement and profitability (proxied by return on assets). The study resultsare consistent with the CCC theory that: 1) there exists a negativerelationship between working capital management and corporate profitability; 2)there exist a negative relationship between inventory conversion period andprofitability; 3) there is a negative relationship between accounts receivablesconversion period and profitability; and 4) there is a positive relationshipbetween accounts payable deferral period (PDP) and profitability. The findingsthus suggest that corporate managers can create value for shareholders byreducing the CCC to an extent that it enhances its profitability.
 
Publisher The Journal of Accounting and Management
 
Contributor None
 
Date 2017-03-26
 
Type Peer-reviewed Article
 
Format application/pdf
 
Identifier http://journals.univ-danubius.ro/index.php/jam/article/view/3814
 
Source The Journal of Accounting and Management; Vol 6, No 3 (2016): JAM
 
Language en
 
Relation http://journals.univ-danubius.ro/index.php/jam/article/download/3814/13275
 
Rights The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.