Purpose – The purpose of this paper is to seek to investigate the impact of cash conversion cycle
(CCC) on performance (i.e. profitability) in Swedish small and medium-sized enterprises (SMEs) over
the 2008-2011 period.
Design/methodology/approach – The study uses a seemingly unrelated regression (SUR) model to
analyse cross-sectional panel data covering 13,797 SMEs operating in four industries.
Findings – The study provides empirical evidence that CCC significantly affects profitability.
In addition, the firm-level control variables size, age, and industry affiliation significantly affect firm
profitability. These findings imply that managers could increase firm profitability by improving their
working capital management.
Research limitations/implications – The present study is limited to a sample of Swedish SMEs in
four industries; further research could examine the generalizability of these findings to other countries
and industries.
Practical implications – Improved working capital policy could improve firm profitability by
reducing the firm’s CCC, thereby creating additional firm value. In addition, the results can be used for
other purposes, including monitoring of firms by auditors, debt holders, and other stakeholders.
Originality/value – The present study contributes to the literature by employing a SUR model to
analyse a comprehensive cross-sectoral sample in a high-tax environment. To the authors’ knowledge,
this is the first empirical study to address this issue in the Swedish context based on a large data set
covering SMEs in various industries.
Keywords Small and medium-sized enterprises, Cash conversion cycle,
Working capital management, Firm profitability
Paper type Research paper
2014. Vol. 10, no 4, p. 442-452
Cash conversion cycle, Firm profitability, Small and medium-sized enterprises, Working capital management