Effect of Cash Conversion Cycle, Firm size and Leverage on Productivity : A Sectoral Analysis in Pakistan

Abstract

The rationale of writing this thesis is to examine the relationship between cash conversion cycle, firm size and leverage effect on productivity sector wise in Pakistan with the data ranging from the years 2004 to 2013. This study incorporates pool model technique to do the analysis of cross section panel data of 40 firms in 8 sectors of Pakistan. The findings of the study are that cash conversion cycle has significant effect on productivity in foods sector only, while other sectors showed insignificant results. This shows that food sector can improve their profitability by reducing the cash conversion cycle. The study incorporated other variables such as firm size and leverage. The findings are that the firm size in chemical sector has positive and significant results on productivity; while in food producer’s sector size have significant negative effect on productivity. All other sectors effect of firm size on productivity showed insignificant results. While on the other side examining the effect of leverage on productivity, the findings are that, chemical, construction, electricity; food producers and general industry were having significant and negative results on productivity. Emphasizing that firm must be more dependent on internal finances rather than external finances if have to remain productive. The limitation of the study is that the present study is limited to small number of firms in each sector.