Premium
Cash cycle: A cross‐country analysis
Author(s) -
Jalal Abu,
Khaksari Shahriar
Publication year - 2019
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12273
Subject(s) - leverage (statistics) , cash conversion cycle , business , valuation (finance) , cash , cash on cash return , operating cash flow , cash flow , monetary economics , cash management , cash flow statement , working capital , cash and cash equivalents , cash flow forecasting , finance , economics , machine learning , computer science
We study the cross‐country differences in the cash cycles of companies and find a negative relation between a country's development and the cash cycles of its corporations. The ability of companies to obtain raw materials on credit and to better manage inventory plays significant roles in shortening the cash cycle. Various country‐specific factors affect cash cycles. Firms with shorter cash cycles invest more in R&D and participate in more acquisitions. They also have a higher valuation and lower leverage. Overall, our findings indicate a close relation between a company's working capital management, its valuation, and the country's level of development.