Working capital management in SMEs


  • This research is part of the Project ECO2008-06179/ECON financed by the Research Agency of the Spanish government. Sonia Baños-Caballero was in receipt of a FPU grant from the Spanish Government. The authors also acknowledge financial support from Fundación CajaMurcia. A version of this work has previously been published as Working Paper No. 457 of the Working Papers Collection of the Foundation of Savings Banks (FUNCAS).


This paper analyses the determinants of Cash Conversion Cycle (CCC) for small- and medium-sized firms. It has been found that these firms have a target CCC length to which they attempt to converge, and that they try to adjust to their target quickly. The results also show that it is longer for older firms and companies with greater cash flows. In contrast, firms with more growth opportunities, and firms with higher leverage, investment in fixed assets and return on assets have a more aggressive working capital policy.