Cash Conversion Cycle and Firm’s Performance of Japanese Firms

In this paper we investigate the relation between the firm's cash conversion cycle and its profitability. This relationship is examined using dynamic panel data analysis for the full sample, by industry and by size. Using a sample of 34771 firm years covering the period 1990-2004, we find a strong negative relation between the length of the firm's cash conversion cycle and its profitability in all our study samples except for consumer goods companies and services companies