The relationship between accounts receivable management and corporations' financial performance

Abstract

This paper examines the correlation between accounts receivable and corporations’ financial performance. In total, 23570 observations are selected, which include 922 listed companies in China from five industries. The data covers a period of seven years from 2010 to 2016. The regression analysis result indicates a significant relationship between accounts collection period, which is a proxy of accounts receivable and corporations’ financial performance, which is measured by gross operating income. Four control variables cash conversion cycle, current ratio, fixed financial ratio and corporation size are also considered. In conclusion, corporations may choose a suitable policy to manage accounts receivable and keep the collection period at an optimal level.