Abstract
Aim
The primary aim of this article is to investigate the effect of the cash conversion cycle (CCC) on profitability within dairy cooperatives in Poland.
Material and Methods
The article employs a panel data approach to analyze the relationship between CCC and the profitability of 53 dairy cooperatives in Poland from 2018 to 2023. The financial data necessary for the empirical verification were collected from the Emerging Markets Information Service (EMIS) database. The study examines both linear and nonlinear relationships between CCC and the profitability of the entities under study.
Results
Empirical evidence reveals an inverted U-shaped relationship between working capital management as measured by the CCC and the profitability of dairy cooperatives. The findings indicate the existence of an optimal CCC level that maximizes the profitability of dairy cooperatives. This level ranges from approximately 21.5 to 23 days, depending on the model specifications. Furthermore, control variables such as leverage and sales growth exert a significant influence on profitability, exhibiting negative and positive effects, respectively.
Conclusions
The findings of this study corroborate the significance of effective working capital management for the profitability of dairy cooperatives in Poland. The financial managers of cooperatives, in their efforts to maximize profit, are advised to calibrate the duration of CCC around its optimal level. This article makes a substantial contribution to the extant literature on working capital management by offering a novel perspective on its relationship with the outcomes of dairy cooperatives. The findings are significant in theoretical and practical contexts.