AbstractThis study examines whether co‐opted directors degrade or improve working capital efficiency. We find strong evidence that firms with more co‐opted boards exhibit lower cash conversion cycles and so are more efficient at managing working capital. After controlling for other factors, board co‐option reduces the length of the cash conversion cycle by about −1.2%, whereas the co‐option of independent directors reduces the cycle by nearly −2.0%. These results persist even after addressing endogeneity and are robust to alternate measures of the cash conversion cycle. In general, our study lends credence to the argument that co‐option reduces managerial myopic behavior as it reduces the likelihood of dismissal and so motivates managers to make better investment decisions that may improve firm proficiency.