Cash Conversion Cycle Management in Small Firms: Relationships with Liquidity, Invested Capital, And Firm Performance‪.‬

Introduction It has been well documented that small firms face significant constraints in raising outside debt and equity capital. Lenders and investors are reluctant to provide financing to small firms due to risks and costs involved, making outside financing difficult and expensive for these firms to obtain (e.g. Cassar, 2004; Levenson and Willard, 2000; Rajan and Zingales, 1995; Berger and Udell, 1995; Holtz-Eakin, Joulfaian, and Rosen, 1994). Additionally, obtaining outside capital is often undesirable for small business owners for personal reasons relating to control, debt aversion, and unfamiliarity with the fund-raising process (Cassar, 2004). These financial constraints, combined with liability of smallness, inexperienced management, and other factors lead to high failure rates among small firms (Forbes and Milliken, 1999; Pissarides, 1999; Cooper, Gimeno-Gascon, and Woo, 1994; Chandler and Hanks, 1994; Stinchcombe, 1965).