Working Capital Management and Firm Listing Status
working capital; cash conversion cycle; private firms; listing status
This study comparatively examines the determinants of working capital management for listed vs. unlisted firms, and assesses the impact of this policy on profitability by focusing on the cash conversion cycle, a commonly used measure of working capital management. By using a large UK public and private firm sample, it is found that private firms have significantly lower cash conversion cycles than their public counterparts, and that traditional determinants of the cycle significantly differ between the two groups. The findings are robust to matching public and private firms according to a number of fundamental characteristics, allowing only for their listing status to differ. Results further indicate that the cash conversion cycle has a relatively stronger (negative) impact on operating profitability for private, compared to public firms. This is consistent with greater importance of efficient working capital management for firms with more restricted access to external financing.