The impact of the cash conversion cycle on the profitability of enterprises in the construction industry

Abstract

This article is to study the effects of the Cash Conversion Cycle (CCC) on the profitability of 58 Joint Stock construction Companies now listed on the Vietnam stock exchange for the period 2014 - 2018. This study uses regression methods, such as Pooled OLS, REM, REM, and finally GLS after performing the test data. The study results showed that: Average Collection Period (ACP), Inventory Period (INT), Cash Conversion Cycle (CCC), and Financial Leverage (LEV) have opposite effects on profitability with high reliability, represented by two criteria, including Return on Assets (ROA) and Return on Equity (ROE) but firm size (SIZE) gives the opposite result. However, the Average Payout Period (APP) has a significant positive impact on ROE but is not statistically significant on ROA.

In addition, the research results also showed that: There is not enough scientific evidence about the impact of the Current Ratio (CR) on profitability.