Purpose – The purpose of this paper is to investigate whether non‐financial firms listed on the Nairobi Securities Exchange (NSE) exhibit a target cash conversion cycle (CCC). The study also examines the speed of adjustment to the target CCC and the factors that influence corporate decisions on the optimum length of the CCC. Design/methodology/approach – Based on a sample of 33 publicly traded firms on the NSE for the period between 1993 and 2008, cross‐sectional and time series analyses were carried out on the data comprising 468 firm‐years. A target adjustment model was developed to examine the significant determinants of the CCC. Various regression approaches including ordinary least squares, fixed effects and two‐stage least squares estimation models were used in data analysis. Findings – The results, which are robust for endogeneity, show that non‐financial firms listed on the NSE maintain a target CCC. Further analysis reveals that these firms adjust to the target CCC at a slower rate. The results show that the determinants of the CCC include both firm‐specific and economy‐wide factors. Specifically, the study establishes that older firms and firms with more internal resources maintain longer CCC. Moreover higher return on assets, investment in capital expenditure and growth opportunities have a significant negative association with the CCC. The results also show a significant positive relation between inflation and the CCC. Practical implications – The study establishes that other than internal firm‐specific factors, the CCC is also influenced by inflation, which is an external, economy‐wide factor. Originality/value – To the best of the author's knowledge, this is the first study to examine whether listed non‐financial firms in a frontier market maintain a target CCC.
Journal of Accounting in Emerging Economies – Emerald Publishing
Published: Jul 1, 2014
Keywords: Inflation; Cash conversion cycle; Capital expenditure; Internal resources; Target adjustment
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera