Date of Award


Degree Type


Degree Name

Master of Science (MS)


Economics and Finance

First Advisor

Tyler Brough

Second Advisor

Jared Delisle

Third Advisor

Jason Smith


A little over twenty years ago, Jose, Lancaster, and Stevens (1996) wrote a paper examining the relationship between profitability and ongoing liquidity management for firms over a twenty-year period, from 1974 to 1993. They test the relationship between the cash conversion cycle, ongoing liquidity management, and other methods of profitability using a regression analysis (Jose, Lancaster, and Stevens, 1996). This paper aims to do the same but with a selection of firms over a different twenty-year period, from 1993 to 2013. We implement Jose et al.’s methodology with updated data to see if contemporary data yields similar results: aggressive working capital management policies enhance profitability and performance. The previous literature found that the cash conversion cycle does have an implication for the profitability and the liquidity of a company. This study replicates these processes and examines the impact to stock returns in addition to traditional measures, ROA and ROE. We gather data from 1974-2017 from firms on Compustat and estimate regression analyses of the cash conversion cycle, ROA, and ROE. There is strong evidence that working capital management policies still affect profitability and performance. Using the same time period, we create a calendar time portfolios of high and low CCC firms. By applying the Fama-French factors, we find that firms with higher cash conversion cycles have lower risk-adjusted stock returns.