The impact of the cash conversion cycle on profitability in listed enterprises in Vietnam

Abstract

The cash conversion cycle is one of the indicators used to evaluate the efficiency of working capital management in the enterprise. This article researches the impact of the cash conversion cycle on business profitability. The article collected unbalanced data on the financial statements of 1,531 listed enterprises in Vietnam in the period 2015-2022. The author used the generalized least squares method (GLS) to test the impact of the cash conversion cycle and some control variables on the profitability of listed enterprises. The results show that the cash conversion cycle affects all three profitability indicators in an inversely proportional direction; some control variables affect profitability indicators in different directions and at different levels of significance. Based on the results, the author had some recommendations to shorten the inventory turnover time, receivables turnover time and manage the payable well, therefore, improving profitability in listed enterprises in Vietnam.