Cash conversion cycle and bargaining power in the product market:A global perspective

• Market power is negatively related to firms’ cash conversion cycles • A dynamic framework links market power to payment-term adjustments • The relationship strengthens during the Global Financial Crisis • Effects are concentrated among firms with positive cash conversion cycles This study examines the relationship between working capital management and market power, focusing on how firms with market power optimize cash generation over time. Employing a dynamic approach, we investigate the role of the cash conversion cycle (CCC) and operating working capital (OWC) in revealing complements to fixed assets. Empirical evidence is consistent with the interpretation that firms leverage market power to extract value through trade credit channels, especially during slow growth periods. The Global Financial Crisis is associated with a stronger relationship between market power and CCC among firms with positive CCC. These findings suggest a shift in working capital management behavior as a form of insurance against credit-market shocks.